François Hollande's campaign pledge to slap a marginal 75 per cent tax on incomes above one million euros a year was so outrageous that it took his advisers by surprise. "Cuba without the sun," one of them reportedly quipped. The same adviser is now the French President's deputy chief of staff, in charge of ensuring that politics prevail over economic rationality.
Some of the 3,000-odd French taxpayers who will be hit by the new tax may have hoped that President Hollande would bury candidate Hollande's surprising proposal. No such luck. So Bernard Arnault, head of luxury empire LVMH and France's richest resident, is asking for a Belgian passport. Talk abounds of a rush of French tax exiles to friendlier havens. Companies warn that top managers will have to move abroad, or of their future inability to "attract top talent." The clumsy protests against the tax are often even more ridiculous than Mr. Hollande's arguments in favour of it.
The protesters tend to forget that the new tax isn't as bad as it looks. The surcharge is temporary – two years only. It will be watered down by the French tax system, which provides ample deductions for families. And it will only hit wages, not income derived from capital. Moreover, the idea that it will deter talent is silly. In the age of high-speed trains and Internet, the CFO of a French-based company can easily work from Brussels or London.
In the current French context, it would be best for the refuseniks to get over it and move on. France is bracing for severe fiscal discipline next year. Two-thirds of the effort will come from tax hikes, and a third from spending cuts. Neither will be popular, but change is necessary. The mix may not be quite right, but the government needs to muster as much support as it can.
As in other Western countries, the rich have had a nice ride in France over the last decade. They may feel that Mr. Hollande's tax punishment is unfair. But in the age of austerity, the privileged should think twice before stoking the flames of social resentment.