French tax increases bring in about half of expected revenue
French President Francois Hollande woke up to a nasty surprise yesterday - a 14 billion euro shortfall in his budget due to wildly inaccurate priojections of how much revenue would be generated by his massive tax increases.
Like politicians in Illinois, New York, and California who banked on big tax incresases on the "rich" to bankroll their spending, Hollande has discovered the law of diminishing returns; people will either seek to avoid the higher taxes or simply refuse to earn the higher income. In the case of France, several high profile citizens have left for greener - and lower tax - pastures.
All in all, Hollande, whose approval rating is below 20, is in deep trouble.
The Court of Auditors said receipts from all three taxes amounted to an extra 16bn euros in 2013.
That was a little more than half the government's forecast of 30bn euros of extra tax income.
The Court of Auditors, which oversees the government's accounts, said the Elysee Palace's forecasts of tax revenue in 2013 were so wildly inaccurate that they cast doubt on its forecasts for this year.
It added the forecasts were overly optimistic and based on inaccurate projections.
The figures come a week after French Prime Minister Manuel Valls, who was appointed in March following the poor showing of Mr Hollande's Socialists in municipal elections, appeared to criticise the president's tax policy by saying that "too much tax kills tax".
Opinion polls put Mr Hollande's approval rating among voters consistently below 20% and critics say his tax policies have hurt France's chance of a sustained economic recovery.
Despite being elected on a wave of anti-austerity sentiment, Mr Hollande has had to implement a series of spending cuts, alongside a number of tax rises.
Meanwhile, economic growth has been inconsistent and the unemployment rate hit a record high of 11% at the end of 2013.
The French economy saw zero growth in the first three months of 2014, compared with 0.2% growth three months earlier.
The income tax rate for France's wealthiest citizens was raised last year - to 75% for salaries exceeding 1m euros - prompting some French citizens, including the actor Gerard Depardieu, to leave the country and seek citizenship elsewhere in Europe.
Mr Hollande has already said he will not slow the pace of deficit reduction, adding France "cannot live with such heavy debt".
Just what did the French socialists think would happen when they imposed such draconian tax rates? Are they really that stupid that they actually believed their silly projections?
The answer is probably no. The projections were goosed so that Hollande's massive new spending initiatives would pass. He will live with the deficit this year and next and hand off a mess to his successor. In the meantime, socialist constituencies are bribed with gobs of cash so that they will continue to vote for socialist deputies.