High-income earners in France are spooked by the possibility of a wealth tax as high as 90 percent, which is on the table following the left wave in the latest election. Many are concerned that the wealthy will leave the country in the wake of the newest legislative regime, leaving no one to pay for the extensive social programs promised to lower-income French citizens.
Potential Economic Impact
If a 90 percent or otherwise high wealth tax is imposed on high-income French residents, many high earners will likely consider moving to lower-tax havens, leaving the French economy in financial crisis.
Recent Election Results
The July election in France ushered in a victory for the hard left, similar to the outcome of recent elections in the United Kingdom, which also saw a hard left turn.
Similarities and Differences from UK Results
Unlike the result in the U.K. which saw a result similar to a super-majority with a governing mandate for the Tories, the French left leaning victory was more modest, and the extreme groups cannot command a true majority, relying instead on a coalition of less extreme left interests.
Increased Public Spending
In France, the victory parties have coalesced around a platform of increased public spending of $125 billion. Wealth taxes are likely the source of the increased public funds.
Impact on High-income Households
This means that households earning more than $340,000 annually may be subject to a 90 percent tax.
French Wealth Manager Sees Trends of Wealthy Leaving Country
French wealth manager Emmanuel Angelier said, “People who can leave will leave if extreme policies are adopted. France would no longer be attractive to foreigners, and the rich would go.”
Financial Migration
If those individuals move across a national border, they may be better off financially, but the French economy, which is already experiencing a budget deficit, will be in crisis.
Migration Destinations
Many analysts have previously noted more incredible migration within Europe than ever, with many wealthy individuals considering moving to Italy, Dubai, the U.S., Singapore, Spain, and Switzerland.
Wealth Tax Will Accelerate Out-Migration of Wealthy
The imposition of wealth taxes will surely accelerate this already underway process. Paris law firm managing partner Xenia Legendre said, “Following Brexit, there was an influx of bankers into France, but these high-earners will leave because they don’t want to pay more taxes. We have new clients like top executives asking what they can do to shield themselves.”
Potential Parliamentary Actions
The French Parliament could prevent the crisis and dispel the public relations nightmare of the looming wealth tax proposal by agreeing not to impose the tax that could sink the economy’s balance. This is possible, as the Parliament is deadlocked due to no party securing an absolute majority.
Parliamentary Composition and Proposals
The party with the most seats is the National Popular Front (NFP), holding 188 seats. The NFP comprises components from the Socialist Party, the Greens, and France Unbowed, and promised voters it would “abolish the privileges of billionaires.”
Top Priorities for Socialist and Leftist Parties
Other top priorities for the left-leaning coalition in power include reinstating a higher wealth tax, eliminating a flat tax, reintroducing an exit levy, imposing a cap on inheritance and making more stringent succession rules to preserve generational wealth.
Conclusion
All of these proposals are seen as unfriendly to the wealthy, and since they have options on where to live, the French government will be negatively impacted by the wealthiest residents’ migration out of the country.
