Note: this is a continuation of the “…and they call it austerity” series.
OK, I’ll admit that this one hurts. I backed Francois Hollande for President of France in the hope that he would stop – or at least slow down – the fauxsterity express due to his refusal to support the Fiscal Union disaster without conditions. As it turns out, those conditions were largely a fig-leaf, and he’s going full speed-ahead (Telegraph, emphasis added):
President Francois Hollande’s Socialist government unveiled sharp tax hikes on business and the rich on Friday in a 2013 budget aimed at showing France has the fiscal rigour to remain at the core of the eurozone.
Of the total €30bn of savings, around €20bn will come from tax increases on households and companies, with tax increases already approved this year to contribute some €4bn to revenues in 2013. The freeze on spending will contribute around €10bn.
To the dismay of business leaders who fear an exodus of top talent, the government confirmed a temporary 75pc super-tax rate for earnings over one million euros and a new 45pc band for revenues over €150,000.
Together, those two measures will bring in around half a billion euros. Higher tax rates on dividends and other investments, plus cuts to existing tax breaks will bring in several billion more.
Business will be hit with measures including a cut in amount of loan interest which is tax-deductible and the cutting of an existing tax break on capital gains from certain share sales – moves worth around four billion and two billion euros each.
So the big-ticket tax increases will bring in less than one billion dollars a year. Swell. Of course, this comes with the usual fauxsterity favorites: overoptimistic economic projections, a spending freeze that does nothing to reduce the size or scope of government, and no regulation reductions.
Now, truth be told, I sincerely doubt the recently defeated Nicolas Sarkozy would have done much better. Odds are the tax increases would have been less visible, and the usual government salary reductions would have been thrown in to make it look like government spending was falling, but that’s about it. On the plus side, France was supposed to be one of the safe havens for investors panicking about the southern eurozone. That won’t survive the next missed revenue projection, bringing the end of the single currency all the nearer.
Sadly, there will much suffering in Europe between now and then.
Cross-posted to Virginia Virtucon