The French Constitutional Council has rejected the government’s flagship plans for a top tax rate of 75 percent.
It is a setback for President Hollande and his Prime Minister Jean-Marc Ayrault, who says the government will redraft the measure.
The new planned rate was one of the more eye-catching of socialist proposals before last year’s elections.
“It’s patriotism to agree to pay an additional tax for the country to recover. And the fact that those on the highest incomes do so I think sets a good example,” said the then presidential candidate François Hollande during the campaign.
The Council which determines whether laws are constitutional is sometimes referred to as the French Supreme Court.
The aim is for the 75 percent rate to kick in on income above one million euros a year.
Judges decided that the tax would apply unevenly as it would hit individuals rather than households: married couples would be affected when one partner earned more than a million euros, but not when each earned just under a million.
The planned measure has touched a raw nerve in France and has divided the country.
“We live in a democracy and sometimes we all need to stand united. I find it normal that high revenues are taxed,” said one man from Paris.
Another disagreed: “Seventy five percent is confiscatory. We are the only country in the world to do that. What’s more, it’s symbolic, it won’t bring in much. It would be better to implement significant measures regarding big companies, rather than tax individuals up to 75 percent,” he said.
Plans for the new top rate prompted some to move abroad. A slanging match ensued between Gerard Depardieu and the government after it was revealed that the world-famous actor was going to live in Belgium.