French PM Lecornu Proposes New Tax on High Earners to Secure 2026 Budget Support

Prime Minister Unveils Tax Plan for 2026 Budget

French Prime Minister Sebastien Lecornu has put forward a proposal for a new tax targeting high-income earners, a strategic move designed to garner support from the Socialist opposition for the upcoming 2026 state budget. The initiative aims to generate an additional 3 billion euros in fiscal revenue, according to reports from financial daily Les Echos. This proposal comes as Lecornu's minority government navigates a fractured parliament, where securing cross-party backing is essential for passing legislation.

Details of the Proposed Measures

The plan outlines two primary measures, both focused on individuals with annual incomes exceeding 250,000 euros (or 500,000 euros for couples). The first measure involves the renewal of a one-off 'minimum tax' (CDHR – differential contribution on high incomes) previously introduced by former Prime Minister François Bayrou. This tax is designed to ensure that all high-earning households contribute at least 20% of their income in taxes.

The second key measure targets tax optimization practices, specifically cracking down on the use of holding companies by the super-wealthy. These financial structures are often utilized to accumulate profits and avoid dividend taxes. The finance ministry has identified approximately 30,000 such entities that fall within the scope of this measure, which is expected to yield over 1 billion euros for 2026. Overall, these and other related measures could contribute between 4 billion and 4.5 billion euros from the wealthiest individuals.

Seeking Socialist Support Amidst Political Divisions

Prime Minister Lecornu's push for this tax reform is directly linked to his efforts to secure the Socialist opposition's endorsement for the 2026 budget. The political landscape in France is marked by a parliament divided into three blocs, with no single party holding a majority, making bipartisan cooperation critical for the government's stability and survival.

While the Socialists have acknowledged Lecornu's proposals, they have described them as 'insufficient' so far, though they remain open to further discussions. The Socialist party has explicitly called for a more substantial 2% wealth tax on France's wealthiest 0.01% as a condition for their support. Public sentiment appears to favor such measures, with an Ifop poll indicating 86% support for a wealth tax, including 92% of President Emmanuel Macron's party voters. Economist Gabriel Zucman, a proponent of taxing the ultra-rich, estimates that a 2% wealth tax on assets above 100 million euros could generate up to 20 billion euros annually.

Navigating Budgetary Challenges

The current budgetary discussions follow a period of political turbulence, including the ousting of Lecornu's predecessor, François Bayrou, over his plans for a 44-billion-euro budget squeeze. In a bid to foster a more collaborative environment, Lecornu has committed to not using the controversial Article 49.3 of the constitution, which allows the government to pass legislation without a parliamentary vote. This decision has been welcomed by both the Socialists and the far-right National Rally, signaling a potential shift towards greater parliamentary engagement in the budget process.