French Wealth Tax Debate Threatens Political Upheaval and Fiscal Policy Shift

The French political landscape is being reshaped by a fierce debate over a proposed wealth tax that has captured the nation’s imagination and could destabilise its current government. Prime Minister Sébastien Lecornu, newly appointed and still settling into office, finds himself under pressure not only from political rivals but also from the resurgent influence of Gabriel Zucman, a Parisian economist whose left-leaning proposals have gained widespread traction.

Zucman’s proposition, commonly referred to as the Zucman tax, calls for a two per cent levy on individuals with net assets exceeding €100 million. The groundswell of support has been striking, with recent polling indicating 86 per cent of French citizens in favour. Calls for greater tax justice resonate in a society still defined by inequality and the legacy of revolution, prompting the Socialist Party to make a wealth tax a key condition for any political alliance with Lecornu’s centrist bloc.

Should the Socialists insist, Lecornu could join his predecessors in quick succession as France’s third prime minister to be unseated in a year. Such political volatility is being fuelled by the contentious nature of the wealth tax proposal, which sits at the crossroads of public desire for equity and the government’s ongoing fiscal challenges. France currently faces a public debt exceeding 113 per cent of GDP, with budget deficits closing in on six per cent, while the cost of government borrowing has begun to surpass that of Italy.

The nation’s wealthiest, led by LVMH boss Bernard Arnault, are vocal in their opposition. Arnault has dismissed Zucman as a far-left activist using alleged expertise to undermine the liberal economy. Critics also argue that a stringent wealth tax would deter investment, threaten employment, and erode competitiveness. Lecornu’s own stance reflects similar apprehensions, citing estimates that the tax might generate less revenue than its supporters claim and warning of potential adverse effects on the broader economy.

Proponents counter that prior wealth taxes were riddled with loopholes, allowing the ultra-wealthy to escape meaningful contribution. They argue that recent global banking reforms have curtailed offshore secrecy, making enforcement more feasible. The proposed tax would complement existing levies, ensuring that the super-rich pay a minimum equivalent to two per cent of net wealth annually, closing gaps exploited in the past.

The French government faces a complex task: balancing the imperative for greater fairness against the realities of fiscal pressure and the risk of capital flight. While the debate continues, both left and right-wing parties have floated alternative approaches, from inheritance tax reforms to revised taxes on financial assets, each with a different impact on business and investment. Whether the Zucman tax prevails or is shelved, France’s search for a sustainable and equitable fiscal solution is far from settled as tax justice remains firmly in the public eye.