Hollande Proposes Tax Hike, Sarkozy Narrows Gap

Nicolas Sarkozy says his opponent’s plan to raise taxes on the rich would “isolate France.”

French president Nicolas Sarkozy narrowed the gap in opinion polls between him and his Socialist rival, François Hollande, for April’s election.

The embattled conservative president, who is fighting for reelection at a time of mounting economic anxiety in France, would win 27 percent of the vote in a first round compared to 31 percent for Hollande according to a recent survey. In the runoff, which is scheduled for May6, the incumbent would trail his opponent by 16 points.

Although he lacks ministerial experience, Hollande is widely liked and promises to increase government spending on education and job training programs. He would renegotiate Europe’s fiscal pact, which requires a deficit under 3 percent of gross domestic product in 2013 and a balanced budget in the long run, and would raise taxes on the very wealthy.

In Paris this week, Hollande proposed to levy a 75 percent tax on incomes over €1 million. He said it was simply a case of “patriotism to accept to pay extra tax to get the country back on its feet again” and argued that it would send “a message of social cohesion” after five years of conservative policies which supposedly favored the rich.

The socialist candidate previously called for the introduction of a 45 percent tax rate on incomes over €150,000. The top income rate is now 40 percent while social taxes that finance health insurance and pension payments are automatically deducted from people’s salaries. There is also a surtax on Frenchmen’s wealth if they own more than €790,000.

The president’s party, which is currently in government, hiked taxes in August and again in November of last year in an attempt to balance the budget. Consumption taxes on liquors, tobacco and soft drinks were raised as was the lowest value-added tax bracket from 5.5 to 7 percent. The top corporate tax is among the highest in the world at 34.4 percent. Total tax revenue was equivalent to nearly 45 percent of France’s total economic output in 2010. Government spending as a share of GDP was nearly 55 percent.

Addressing supporters in the southern city of Montpellier, Sarkozy criticized Hollande’s tax plan. He argued that “tax policies that discourages work, that discourages initiative, isolate France from the rest of the world.”

I believe in paying more to those who work more. I believe in the choice of rewarding talent. Rewarding merit and valuing success are principles that have always been dear to the republic.

Specifically, he proposed a 25 percent pay raise for teachers who agree to work longer hours. This is contrary to Hollande’s promise to hire an additional 60,000 teachers during his first term in office.

The president also hopes to give employers more flexibility to increase working hours in the private sector although he has stopped short of advocating an end to his nation’s treasured 35-hour workweek.

French employees also enjoy five weeks of legally mandated vacation, besides national holidays, and compensatory time off for working overtime. That should amount to some fifty days of paid vacation per year but combined cleverly with “bridges” over workdays that fall between off days, most French actually have a week off nearly once a month.

As a result, French workers are less productive than most of their European counterparts. An hour of work costs $43 on average in France compared to $36 in neighboring countries.