In his plans for helping France's economy turn around, new President Francois Hollande has pledged to increase the rate of income tax to 75% for those residents making more than 1 million euros a year.
The plan is back in the spotlight in Hollande's recent visit with UK Prime Minister David Cameron. Cameron has said the tax hike would drive businesses to Britian - which he joked he'd welcome with open arms - but the French leader denied such an effect.
How does a 75% top rate of tax compare with other leading economies?
• In Great Britain next year, tax on earnings over $230,000 will be cut from 50 to 45 percent in an effort for some stimulus there, according to the Chancellor of the Exchequer.
• In the United States, the top rate of federal income tax is 35%. Do remember, though, state income taxes could add up to 11% on top of that.
• In Germany, taxpayers have a top rate of 45%.
• In Japan, including local taxes, the top rate is 50%.
How will higher taxes in France help or hurt its economy? Peter Morici is a professor of international business at the University of Maryland, and previously, he served as Director of Economics at the U.S. International Trade Commission. He talked to CNN recently about what to expect in the following edited version:
CNN: Hollande is looking to cut about $10 billion off the budget deficit. There's only about 3,000 households who earn over a million euros in France. Does this really matter? Is this a bad thing or a good thing, do you think?
MORICI: If it drives those households to Britain, it is a bad thing for France, and it sends a terrible message abroad that France is not very hospitable to profits and to people who are entrepreneurs and so forth.
It won't have a positive effect. This is not, for example, Sweden, where there's a consensus for high taxes and where people have confidence the government is run well. In France, they're doing this because the government isn't run well.
CNN: Somebody has got to pay for these economies to get themselves out of the messes that they're in, and in France, Hollande says that should be those who are earning over a million dollars plus. If you go back to Economics 101 and the The Laffer Curve theory, isn't there a point at which it's just exiles looking to jump from the country? That there is a point at which theory tells us that you can tax people too much?
MORICI: Absolutely. In America, the taxes are much higher than you even describe, because we have an enormous estate tax. So, older Americans, like myself - I pay 50 cents on the dollar with estate tax on everything I earn, and then I put it in the bank. I'm not going to use it.
Now, I'll die in a few years, maybe 10, 15 years, and my son and daughter will inherit it, and they'll pay another 55 percent if the Bush tax cuts expire. So, for every dollar I earn, in the end, my heirs get 25 cents? It discourages a lot of older people from investing and taking risk, and they're the ones with the capital to do it.
CNN: Where do you see Europe headed going forward? Are we going to see a sort of tax-and-spend initiative? The sort of pump priming these economies in a sort of old-style Keynesian way? Or will we be looking for a much leaner way of doing this, do you think?
MORICI: In the near term, I think that France is going to be in the lead. There's a sense that austerity has gone too far. But I want to be careful not to put Europe all in one basket. Britain is not inside the eurozone and so forth.
However, the debt inside the eurozone is really burdensome. Long term, I don't see how the Mediterranean economies, the four big Mediterranean economies, can become viable without about a 50 percent write-down on their debt.