France has budget problems, so politicians reached for a politically popular solution: Tax the rich.
Never mind that France already had the second highest tax rate in Europe for its top bracket at 55.4 percent. Or that it already had surtaxes on income over 250,000 euros and income over 500,000 euros.
Politicians hashed out a compromise in 2025 to add a “differential contribution” for individuals with taxable income over 250,000 euros. If, after calculating tax liability, someone’s average tax rate was below 20 percent, they’d need to pay extra to reach that proportion.
The government forecast that this would raise 1.9 billion euros in revenue during 2025. Turns out, it actually raised — sacre bleu! — 400 million euros, a 79 percent miss. The tax’s projected revenue for 2026 is now a billion euros less than previously estimated.
The government blames the shortfall on a change in the tax’s design. It was supposed to be retroactive to 2024, but in practice it applied only to 2025. Saying that a tax works if it re-taxes people who already paid is not the strongest argument for its soundness.
The French far-left say the problem is the tax didn’t go far enough. (They always say that.) But government already took in over half of France’s GDP in revenue in 2024, before the new tax was added. How much is enough?
Like other European countries, France doesn’t tax only the rich at higher rates than the U.S. It also taxes ordinary workers more too, OECD data show. A lot more.
The average single French worker gets to keep only 53 percent of his or her pay after taxes, compared with 70 percent for the average single American worker. For average one-earner families with two children, the tax burden is almost twice as high in France as in America.
And those figures are only for taxes on labor. They don’t include the burden of France’s national value-added tax, with a standard rate of 20 percent on consumer purchases of goods and services. (Compare that with the average U.S. sales tax rate of 7.53 percent.)
France’s massive welfare state was not built by taxing the rich. It was built by taxing the rich and everyone else at far higher rates than Americans would ever tolerate.
Yes, France has universal government health coverage, but nearly all French people have private insurance on top of that.
France also has lower average gross wages (adjusted for purchasing power), a much higher unemployment rate and much slower economic growth than the U.S. These stats of shame are all related.
Even then, all those taxes still aren’t enough to avoid an enormous budget deficit. Efforts at reform have torn apart French politics, and bond markets are now making clear that past changes weren’t anywhere near enough to solve the problem.
The unsustainable welfare state also means France cannot afford its ambitions to build a self-sufficient military or fully support Ukraine as it fends off Russia.
The bleak conclusion: Politicians in Paris have made promises they can’t keep to a people who are now dependent on government for their livelihoods.
Charismatic socialists keep trying to sell Americans on the European model. Look under the hood, and it’s clearly a lemon.
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