The French government have just issued their latest budget proposals. This is against a background of three quarters of recession and unemployment of 10.2%. Also the French government budget deficit is significantly higher than it needs to be to meet Euro area rules.
So the French are proposing a 75% tax rate for the really high earners. There is also a new 45% tax rate for those earning more than £120k.
This has an obvious effect on income distribution and that suits the new socialist administration (the LibDem's have similar ideas in the UK). But many say that the French have again missed the point.
The French have resisted making the supply-side reforms which have helped other economies, like the UK, adjust working conditions in the face of the crisis. French employment law continues to discourage firms from employing staff on a permanent basis and raises the cost of employment further beyond the wage rate making employing staff expensive.
The rise in profit taxes makes the prospects for employment worse not better.
The French are caught in a difficult situation. They want to help ease the recession and help the poor and unemployed, but they are finding it hard to make the tough decisions.
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