French president Francois Hollande has suffered a fresh setback as the country's highest court threw out his plan to tax the ultra-wealthy at a 75% rate, saying it was unfair.
It had been one of the flagship campaign promises of Mr Hollande's election and the government has vowed to resubmit the measure.
But France's Constitutional Council ruled that the way the highly contentious tax was designed was unconstitutional.
The largely symbolic measure would have only affected a few thousand people who earned over €1m (£818,000) and brought in an estimated €100m to €300m (£82m to £245m).
But it has infuriated high earners in France, prompting some such as actor Gerard Depardieu to flee abroad, and has led to accusations that Mr Hollande is 'anti-business'.
Finance minister Pierre Moscovici said the rejection of the 75% tax and other minor measures could cut up to €500m in forecast tax revenues but would not hurt efforts to slash the public deficit to below a European Union ceiling of 3% of economic output next year.
"The rejected measures represent €300m to €500m. Our deficit-cutting path will not be affected," Mr Moscovici told BFM television.
Prime Minister Jean-Marc Ayrault said in a statement that the government would resubmit the measure to take the court's concerns into account.
The court's ruling took issue not with the size of the tax, but with the way it discriminated between households depending on how incomes were distributed among its members.
A household with two earners each making just under €1m would be exempt from the tax, while one with one earner making €1.2m would have to pay.
The French government approved the tax in its most recent budget, amid criticism by some that it would do little to stem the country's mounting fiscal problems and would drive away the wealthiest citizens.
In recent weeks, Gerard Depardieu - France's most famous actor - announced his intention to turn in his French passport and move to a village in a tax-friendly Belgium .