Quebec’s and France’s intentions to tax “les riches”

Quebec is taking a page from France's book. To battle deficits and increase revenues, recently elected leaders in France and Quebec have announced intentions to deliver tax hikes to higher-income residents.

Earlier this month, France's new Socialist president, FranÁois Hollande, proposed a 75% income tax on the portion of an individual's income that exceeds €1 million (C$1.2 million) a year. More recently, Quebec's Parti Québécois premier, Pauline Marois, made good on an election promise to introduce provincial tax brackets for incomes over $130,000 and over $250,000, with provincial tax rates expected to be 28% and 31% respectively. That is on top of federal income taxes. Add in the maximum federal tax and Quebecers in the $130,000 to $250,000 tax bracket would see their marginal tax rate rise to 52%; for those earning more than $250,000 it would be 55%.

The majority of taxpayers seem content with these new plans. According to the New York Times,  half the nation's households earn less than €19,000 a year; only about 10% of households earn more than €60,000 annually. In Quebec, according to The Globe and Mail, Ministry of Finance figures show that in 2010, slightly more than 102,000 people earned between $130,000 and $250,000 a year; another 38,000 earned more than $250,000 a year.

The wealthy, however, are clearly unimpressed. The United Arab Emirates' English-language The National.ae has reported that Bernard Arnault, the owner of the LVMH luxury goods group and the wealthiest person in France, has since applied for citizenship of neighbouring Belgium, where the fiscal regime is more agreeable.

Many more are concerned that France's aggressive tax plan will scare away investment and jobs, hurting the already-fragile economy. Another top earner in France described the 75% tax to the The National as "morally and politically legitimate but economically stupid.î

Those concerns are mirrored in Quebec. "Anything above 50% means that you're really working for the government more than yourself," Jamie Golombek, managing director of tax and estate planning at CIBC Private Wealth Management, told Montreal's The Gazette. "It's a huge barrier."

Hollande estimates he must create €30 billion in new taxes and spending cuts to meet his target of reducing the public deficit to 3% of GDP by the end of next year. For Marois, the challenge is replacing the $850 million lost when the government eliminates Quebec's health tax.

As these controversial proposal comes closer to reality, the world will be watching to see how both France and Quebec are affected and what the wealthy choose to do. Such policies may help win an election, but only time will tell if taxing "les richesî will steer an economy out of the sewer.