French Socialists Propose 'Zucman Tax' on Fortunes Exceeding €100 Million Amidst Budget Debates

Socialist Party Pushes for Wealth Tax

The French Socialist Party (PS) has formally announced its plan to introduce an amendment in the National Assembly for a new two percent tax on large fortunes. This 'Zucman tax', named after economist Gabriel Zucman, would target individuals with wealth exceeding 100 million euros, aiming to bolster public finances amidst a deepening economic crisis in France.

Olivier Faure, First Secretary of the French Socialist Party and a Member of Parliament, confirmed the party's commitment to this initiative on Wednesday. Boris Vallaud, head of the Socialist party grouping in parliament, stated that taxing high-wealth individuals is 'one of our principal battles and we're going to put all our energy into it'. The proposal is set to be a key point of contention as the French parliament begins debating next year's budget.

Details of the Proposed 'Zucman Tax'

The proposed 'Zucman tax' is designed as a two percent levy on net wealth above 100 million euros. Economist Gabriel Zucman, who conceptualized the tax, estimates it would affect approximately 1,800 households in France, representing about 0.01% of taxpayers. Proponents suggest this measure could generate up to 20 billion euros annually, significantly contributing to the reduction of France's budget deficit. However, other economists have offered more conservative estimates, suggesting a yield closer to 5 billion euros, accounting for potential evasion and legal challenges.

The Socialists argue that this tax would not only raise essential revenue but also address fiscal fairness, given that some ultra-wealthy individuals reportedly pay lower effective tax rates than middle-income citizens. Public opinion appears to largely support such a measure, with polls indicating that over three-quarters of French citizens favor targeted taxes on the ultra-wealthy.

Addressing France's Public Finance Crisis

The push for a wealth tax comes as France grapples with a severe public finance crisis. The nation's debt stands at approximately 114 percent of its Gross Domestic Product (GDP), with a budget deficit estimated at 5.4 percent for the current year, among the highest in the European Union. The government aims to reduce this deficit to 4.7 percent in 2026, necessitating a fiscal squeeze of more than 30 billion euros. This includes potential cuts to corporate tax breaks, stricter social welfare contribution rules, and the introduction of new taxes.

The economic challenges have been exacerbated by global events, including the pandemic and the energy crisis following Russia's 2022 invasion of Ukraine, leading to substantial government spending on subsidies. This context has intensified calls from the left for greater contributions from the wealthiest to help stabilize the national budget.

Political Landscape and Outlook

The Socialist Party's proposal is being introduced during a period of significant political instability in France. Prime Minister Sébastien Lecornu, who recently faced and survived no-confidence votes, has publicly expressed opposition to a broad-based wealth tax. However, he has indicated a willingness to consider an 'exceptional levy' on large fortunes. The Socialists' decision not to join the no-confidence vote against Lecornu was reportedly influenced by a concession from the Prime Minister to suspend controversial pension reforms until after the 2027 election, a move seen as crucial for securing support for the upcoming budget.

Despite the public support, the 'Zucman tax' faces considerable opposition from conservative politicians and employer groups, who argue that such a tax could deter investment and encourage wealthy individuals to leave France. Previous attempts to implement similar wealth taxes, such as the Impôt de solidarité sur la fortune (ISF), were eventually abolished in 2017, with critics citing concerns about capital flight. The outcome of this debate in the National Assembly will be a critical indicator of France's approach to economic policy and wealth redistribution in the coming years.