The United States and France have been friends for centuries. The French navy provided much of the military might we needed to defeat the British in the Revolutionary War. The French Revolution inspired our own founders to the promise of republican government. And French territory, acquired in the Louisiana Purchase, provided land for 15 of today's 50 states. While the United States and France never shared the same sort of "special relationship" as the United States and England, the two countries have traditionally shared a warm bond.
Today, France doesn't stride quite so mightily across the world stage. But the land of liberte, egalite, and fraternitestill sponsors the world's most prestigious bicycle race (now maybe best known for an American cheating). They still host the occasional Jerry Lewis film festival. And really, who does toast better than the French?
Now it turns out there's something else that France does well, and that's taxing its citizens. The French newspaperLes Echos reported last week that thousands of French households paid more than 100% of their 2012 income in tax. Sacre bleu! How can this be?
Last year, the Socialist candidate Francois Hollande ousted the conservative Nicolas Sarkozy to become France's President. Hollande immediately did what Socialists typically promise to do — he hiked taxes. Specifically, the new government imposed a one-time levy on 2011 income for households earning over €1.3 million (roughly $1.67 million). That levy hit top incomes hard. In 2012, over 8,000 households paid taxes topping 100% of their income. 9,910 households paid between 85% and 100%, and a further 12,000 paid between 75% and 85%. And you think you pay a lot?
Hollande wasn't satisfied with that one-time hike. He also proposed an "exceptional solidarity contribution" nearly doubling taxes on about 1,500 top earners with income over €1 million from 41% to 75%. That move led actor Gerard Depardieu and several other high-profile personalities to renounce their French citizenship.
France's Constitutional Council, which rules on the constitutionality of legislation before it goes into effect, struck down that 75% tax as unfair. They didn't have a problem with the rate, per se. They objected that it applied to individuals rather than households — a household with two individuals, each earning €900,000 would escape it, while a household with a single individual earning €1.1 million would pay. However, the council still approved raising the top rate to 45% on incomes over €150,000 (roughly $198,000), cutting several existing loopholes, and stiffening a wealth tax on net assets worth more than €800,000. And Prime Minister Jean-Marc Ayrault has pledged to reintroduce the 75% top rate, using the template provided by the Constitutional Council.
Perhaps not coincidentally, Hollande is now the least popular president in French history. How happy would yoube with your President if he wanted three out of every four of your extra dollars!
Fortunately, our taxes are nowhere near that high. But they still aren't any fun to pay. That's why we focus our business on proactive tax planning to help you pay less. Maybe you'll use the savings for that dream vacation you've always wanted. They say Paris is nice this time of year!
Kenneth Hoffman of K.R. Hoffman & Co., LLC is a highly sought after tax and business counselor. Counseling Entrepreneurs, Professionals and Select Individuals who are struggling with ever changing tax laws and who are paying too much in taxes. All the while he is protecting his clients from the IRS and other taxing authorities using proactive tax planning strategies, ensuring compliance with minimal tax liability.
Discover how I can help you overcome your tax and business challenges. To start the conversation or to become a client, call Kenneth Hoffman at (954) 591-8290 Monday - Friday between 8:30 a.m. to 1:00 p.m. for a no cost consultation, or drop me a note.