France's Socialist-dominated parliament voted on Thursday to end tax breaks on overtime work and raise wealth tax, abolishing two cornerstones of the economic policy conservative former president Nicolas Sarkozy pursued over the past five years.
Removing the tax break on overtime will stimulate the job market, and taxing the rich will mean reducing the deficit without reducing government spending (austerity).
Hollande won power on pledges to reboot the economy and get rid of a large deficit without subjecting voters to Greek-style austerity, primarily by proposing a tax-and-spend program that he says will hit the rich harder.
The US, of course, has a deep deficit because it is unable to generate serious revenue from the rich, who, after Obama has been in power for four years, and after five years of a deep recession, are still enjoying Bush-era tax cuts.
Federal revenue has declined over the last decade as a result of a host of tax cuts and growing exploitation of deductions, credits, and loopholes. Tax cuts in 2001 and 2003 helped turn budget surpluses into deficits, and the federal government has now run deficits for over a decade. The deficit in fiscal year 2012 is projected at $1.2 trillion, which means the federal government will borrow nearly a third of every dollar it spends this year.
The Great Recession has also contributed to the federal government’s cash shortfall – when fewer people are employed, fewer people pay taxes. But even without the weak economy, the federal deficit would be sizeable.
If the US was to end the Bush-era tax cuts and block tax loopholes for individuals and corporations, the deficit would be nothing to talk about.