Mon Feb 9th, 2009 at 07:03:48 AM EST
Last Thursday night, our fearless president invited himself on three -- count them, three -- national TV channels for one hour and a half prime time interview by four journalists from these three most widely viewed TV channels: France 2, the public channel whose top boss will be now directly appointed by Sarkozy himself (a recently voted law), TF1 and M6, whose owners, Martin Bouygues and Vincent Bolloré, happen to be Saroky's BFF, just like pretty much everyone who counts in the clubby world of French capitalism.
Satirical weekly, Le Canard Enchainé, wrote this snarky headline: "Sarkozy had sworn: No commercials after 8 PM". Rules just apply to the common men, I guess.
promoted by afew
So, our president spoke for over an hour. What were the salient points? Reform!
Sarkozy vowed to continue the reforms he engaged when taking office about two years ago, neolib reforms of course: more flexibility on the work market, drastic cuts in the number of civil servants, reduced health insurance coverage and overall "starve the beast" policies in the health, public education and public television sectors, tax cuts for the rich, alignment on the US foreign policies and its Westernist Islamophobic stance, with our soldiers in Afghanistan and France soon to be back in the NATO's integrated command.
Reform. no matter what Jerome and afew say. Even if the neolib policies have put the world into a hole, our president's plan: keep digging!
The major announcements though had to do with tax policies: Sarkozy decided to abolish a local business tax ("taxe professionnelle") in 2010 and also to suppress the lowest income tax bracket.
Yes, Ronald Reagan is not dead: tax cuts as the universal cure for our ailments is the official religion in Sarkozia.
On the business tax: it's been known for years that this tax is highly problematic (late president Mitterand reportedly called it "the imbecile tax"): it is paid by businesses to the municipality where there are based. Cities that have the good fortune of having large businesses within their boundaries can enjoy a tax windfall while their neighbors can only count on increased property taxes on individual home owners to make both ends meets. Case in point: the La Defense business district where a very large number of French large companies have their corporate HQ. This district is spread over two municipalities, Puteaux and Courbevoie who get most of the tax revenue. I said most because over the years, reforms have tried to alleviate the most unfair aspects by spreading the local business tax revenue over all the municipalities in the same district to try to correct the unequal treatment.
Anyway, the business owners hated this tax and wanted it gone: this will be done next year. Conveniently enough, since the Socialist (PS) is now mostly reduced to local governments, to whom the business tax is a major income, this tax cut conveniently doubles up as a torpedo to his opponents who will have no choice than increasing the taxes on individuals (like property tax) to compensate for this source of income removed by the state. UMP mayors who are collateral victims of this cunning plan are worried, but not too openly (yet).
Income tax: remember that shortly after taking office in 2007, Sarkozy had the parliament enacting a "fiscal shield" limiting the total amount of taxes paid by France's wealthiest tax payers. Now, as pointed out by Pascal Riché at Rue89, Sarkozy is going after the lower bracket of the income tax. Riché suggest this is a move in order to try to get back the lower tier of the middle class, whose progressive impoverishment -- thanks, in part, to Sarkozy's neolib reforms -- is driving them away from the right.
The peculiarity of the French tax system is that hardly half of the households actually pays income tax at all: the other half is exempted because their income is too low -- under the threshold. Income tax is progressive though: the richest pay a proportionally higher share than the poorest -- to everyone according to one's means.
But income tax is so limited in France that it represent only a very limited share of the total state tax income. What's making for the remainder? Several taxes, such as fuel taxes but largely VAT. VAT has the obvious advantage of being invisible (unlike the US, in Europe, prices are displayed with "all taxes" included) and even the half of French households who don't earn enough to pay income tax do actually pay VAT: they have to eat and buy clothing and other necessities -- thus paying VAT. One can even argue that the poorer households pay more VAT that the richest ones -- proportionally, they certainly do.
So a progressive tax reform would aim at increasing the (progressive) income tax base and revenue while decreasing flat taxes like VAT.
Interestingly Gordon Brown has chosen to decrease VAT in the UK: the opposite of Sarkozy's move. Obviously, Sarkozy could have done without the snide comments vis a vis Brown's policies, but like the scorpion and the fox, it looks like he couldn't help it: it's my nature.
So less taxes for the wealthy, more tax burden for the poorest, with the French state cutting local governments "air supply": this is the great 2010 tax swindle.