ORIGINAL FRENCH ARTICLE: Sarkozy égratigne les revenus du capital
by Yves Housson - Article paru le 29 août 2008
Translated Wednesday 24 September 2008, by
RSA . The President feigns taxing certain financial revenues, triggering seeming concern among partisans of the right wing and employers. However, we are a far cry from fiscal equity...
Approval from the socialist Left, sharp criticism among partisans of the conservative UMP (Union for Popular Movement) party and the MEDEF (employer’s union)… It’s almost enough to make you wonder which side you’re on, politically speaking… As it was presented to us by the media, Nicolas Sarkozy’s announcement of his intention to tax the profits of capital in order to finance a program in favour of the underprivileged could easily lead to some confusion. Yesterday, in a speech delivered in the administrative region (département) of the Mayenne, on the subject of his proposed Active Solidarity Revenue (RSA), scheduled to take effect as of July 1st 2009, the French President officialised the idea of financing it with an additional tax of 1,1 % on inheritance income and investments (dividends, stocks, life insurance). « The government is going to assume its responsibilities. The reform will not be financed by the budget deficit (…) I consider it only natural that everyone contribute to the cause of helping more than 3 million of our fellow citizens to overcome poverty and exclusion », he stated at Changé, a community outside of Laval (Pays de la Loire). This decision undoubtedly represents a retreat when compared with the government’s initial intention, which would have financed the RSA by abrogating the prime pour l’emploi (PPE) , which is paid to some 9 million low income workers. In other terms, the initial measure would have, thus, taken that money from the poor in order to redistribute it among those even poorer. Given the social context of dissatisfaction over reduced consumer purchasing power, and a strong feeling of injustice ever since the government approved last summer’s extravagant « fiscal package »  , this sudden pirouette is more than purely symbolic.
The « surtax » would bring in 1,5 billion Euros
Instead, we are told, it will thus be up to the wealthy to contribute. That certainly makes for a nice political poster. The truth, however, sounds less grand. Let’s put things in their proper perspective. The said « supertax » would produce 1,5 billion Euros. For total RSA expenditures estimated at 13 billion Euros. The bulk of the burden would, therefore, still be supported, essentially, by the taxpayers as a whole. Unlike the version that alarmists such as Édouard Balladur and Laurence Parisot would have us believe, the modest supplementary capital levy does not signify a radical change in the fiscal policy pursued by the right over the last few years. A tendency characterized by « a general reluctance to tax high incomes, capital assets, estates, investors, trusts and multinationals », as observed by the Syndicat national unifié des impôts (SNUI)  . And illustrated, once more, by the « fiscal package », a gift amounting to some 13 billion Euros in the form of tax relief reserved, essentially, for those endowed with inheritance income and who pay French Wealth Tax (ISF). Too much, compared with the meagre 1,5 billion yield expected of the new tax… To call into question the advantages, the many rebates, fiscal loopholes and other exemptions which benefit those privileged by fortune, that is what might serve as a basis for reflection as to possible alternatives for the funding of a social policy.
The left, and especially the French Communist Party (PCF), have long pleaded the cause of implementing a capital gains tax, in particular as a contribution to the Social Security budget. But, it would first be a question of tapping the speculative financial revenues of big business and banks, now amounting to some 80 billion Euros a year. Income which is now exonerated from any contribution, and which, even today, is still spared by Nicolas Sarkozy’s « surtax ». If they were made to pay proportionately as much as the workers, the tax would produce, according to estimations, around 10 billion Euros each year.
This system « encourages bosses to maintain extremely low wages »
One can plainly see that we are a far cry, with this decision of the President, from those « courageous measures » going beyond « ideological cleavages », recently flaunted by one of his most fervent supporters, Christian Estrosi, UMP Mayor of Nice.
That tiny pinch of capital gains is, nevertheless, – but, that comes as no surprise – unbearable in the eyes of some, such as the President of the MEDEF employers union, who predicts, without the least fear of mockery, an avalanche of employers contributions , or ex-Prime Minister Édouard Balladur, who calls instead for « economizing on budgetary expenses ».
Yet, this affair does not resume the debate instigated by the RSA, which was to be presented to the Council of Ministers on September 3rd. Its very principle is subject to controversy. « The RSA is primarily an implement for getting people back in the work force, which constitutes a real cultural revolution in our approach to social policy », Labour Secretary Laurent Wauquiez, trumpeted, yesterday. The truth is, according to the analysis of the French Communist Party (PCF), among others, that this new system « encourages the maintainenance of extremely low wages » and, « even worse, increases the pressure for an overall slump in salaries ». An affair to follow closely.
 an internal revenue bonus accorded to former welfare beneficiaries having found, and/or kept, a job
 The « paquet fiscal » or, so called TEPA Law, because it is said to encourage Travail, de l’Emploi et du Pouvoir d’Achat or, Labour, Employment and Purchasing Power) was adopted by the French Parliament, under Prime Minister François Fillon’s government, on April 1st, 2007. Sarkozy’s first measures directly benefit the employers. His recent tax package includes:
• A new "fiscal shield" setting the maximum rate at 50 per cent of income for the total taxes to be paid to the state by a single person (this would only benefit the 93,000 richest families!)
• The effective abolition of inheritance tax.
• Exemption for the bosses from paying insurance contributions (social security, pensions, etc.) for employees’ overtime working hours.
 SNUI, first Union in the French Finances Administration. Also, Member of the Association pour la taxation des transactions pour l’aide aux citoyens (Association for the Taxation of Financial Transactions for the Aid of Citizens, ATTAC), an activist organization for the establishment of a tax on foreign exchange transactions (see Tobin tax).
 for social security, work-related accidents and family allowances