France Approves Modest 'Unproductive Wealth' Tax Amid Budget Negotiation Turmoil
France approves a modest new 'unproductive wealth' tax amid complex 2026 budget negotiations marked by political deadlock and party tensions.
- • New 'unproductive wealth' tax approved on October 31, modifying the real estate wealth tax (IFI).
- • Tax expected to have limited yield, mainly affecting 'small millionaires' not ultra-rich.
- • Budget negotiations remain difficult with no clear majority for the finance bill.
- • Political tensions include opposition from various parties and threats of government censure or elections.
Key details
On October 31, 2025, the French National Assembly passed a new tax targeting 'unproductive wealth,' a modified version of the existing real estate wealth tax (Impôt sur la Fortune Immobilière, IFI), as part of the 2026 budget bill discussions. The tax was approved by a narrow vote of 163 to 150, achieved through an unexpected alliance of Socialist, MoDem, and far-right Rassemblement National (RN) MPs. This measure reflects a limited fiscal adjustment rather than the more ambitious or punitive tax reforms initially proposed, specifically rejecting the previously debated Zucman tax on the ultra-rich.
The new tax is expected to generate limited revenue and primarily affects "small millionaires," not the ultra-wealthy, marking a compromise between calls for greater tax progressivity and concerns over economic impacts. Despite its passage, the broader budget negotiations remain fraught. Prime Minister Sébastien Lecornu faces mounting challenges in securing a parliamentary majority, complicated by fractious party dynamics including pressure within the Socialist Party from La France Insoumise, and vocal criticism from Macronist deputies over recent tax concessions.
Earlier in the week, deputies dismissed the larger-scale Zucman tax proposal, instead adopting this "lighter" wealth tax variation. Opposition remains strong from many on the left and right, who see the budget as regressive or insufficiently ambitious. Socialist leader Olivier Faure warned of a "regressive budget" and hinted at potential government censure or snap elections. Meanwhile, pressure from prominent Socialist voices such as Boris Vallaud is intensifying on the government to reconsider its budgetary choices.
The abandonment of the constitutional tool Article 49.3 by Prime Minister Lecornu on November 3 has left the government relying on fragile political coalitions and abstentions from various parties, including ecologists and communists, to pass the finance bill. As negotiations drag on, the budget's approval remains uncertain, highlighting deep divisions in France’s parliament over fiscal policy and wealth redistribution ahead of 2026.
In summary, France's 2026 budget negotiation showcases significant political challenges, with the new 'unproductive wealth' tax symbolizing a modest compromise amidst broader parliamentary deadlock and ideological tensions within the governing and opposition forces.