Removal of the housing tax, disappearance of the solidarity tax on wealth (ISF), establishment of a single flat-rate levy (PFU) on property income… These tax reforms decided since the start of has the presidency of Emmanuel Macron been beneficial for a large number of French taxpayers? This is what the Prime Minister, Michel Barnier, argued during his general policy speech on Tuesday, October 1, to the National Assembly. “The tax cuts decided over the last seven years (…) have helped (…) many French people, many businesses, and have given some fresh air to an unprecedented and serious situation”assured the head of government, referring in particular to the consequences of the health crisis linked to Covid-19.
However, faced with the deterioration of public accounts, the tenant of Matignon announced a roadmap breaking with the philosophy of the Head of State and his troops. He pleaded for “a targeted effort, limited in time and shared, in a demand for tax justice” and asked “an exceptional contribution to the most fortunate French people”. While the choices of his predecessors are being questioned in the face of budgetary difficulties, is the observation made by Michel Barnier, according to which tax cuts have benefited many taxpayers, fair?
DPG: Michel Barnier announces “an exceptional contribution”
Since the election of Emmanuel Macron, Bercy replaced the ISF with the real estate wealth tax (IFI) in 2018, implemented a single flat-rate levy on property income the same year, and gradually eliminated the tax housing on main residences for all households. In total, since 2017, the reduction in compulsory household deductions has cost 31.2 billion euros per year, according to an evaluation by the Jean-Jaurès Foundation. This evaluation includes the abolition of the housing tax, the reform of the income tax, the real estate wealth tax (IFI), the abolition of the audiovisual contribution and reductions in social security contributions for the self-employed.
However, is it true that “lots of French” benefited from it? The abolition of the housing tax on main residences was one of the flagship measures of Emmanuel Macron’s first five-year term, presented as a way of promoting purchasing power. It first affected the lowest 80% of tax households, with a drop of 30% in 2018, then 65% in 2019, before being eliminated in 2020. For the remaining 20% of taxpayers, a timetable similar was applied between 2021 and 2023. Since January 1, 2023, only owners of a second home continue to pay housing tax.
In 2019, one year after the start of the reform, 24.1 million households were liable for housing tax on their main residence, according to a note (PDF) of the Department of Fiscal Studies and Statistics of the Ministry of Finance. Each household was taxed on average to the tune of 383 euros.
“Among the major measures having a very uniform effect on the entire population, there is the housing tax”analysis from franceinfo Paul Dutronc-Postel, economist at the Institute of Public Policies (IPP) and co-author of an evaluation note on this reform. However, the results of this measure seem to be put into perspective: “A part, albeit limited, of the gain in purchasing power was captured by an increase in property prices and rents”underlined Pierre Moscovici, first president of the Court of Auditors, during a meeting of the Finance Commission of the National Assembly in January, based on the conclusions of the IPP. Of all the tax gifts made to French taxpayers, this measure remains the most costly for the State, to the tune of 18.2 billion euros annually since it became widespread, according to the Jean-Jaurès Foundation.
Another measure for taxable households: the creation since January 2018 of a “flat tax”, a single flat-rate levy (PFU) of 30% on all income from savings or financial capital excluding real estate (dividends , rents received, life insurance, etc.). Previously, taxpayers were taxed according to a more complex system, combining a progressive income tax, of up to 45% for the highest incomes, and social contributions such as the general social contribution (CSG). The taxpayer, however, has the choice of remaining taxed according to this old method of taxation.
The 2022 income declaration concerned 40.7 million tax households, of which only 18.2 million paid income tax, according to the DGFiP note. However, it is not specified how many households have opted for the PFU. In 2022, the wealthiest 0.1% of taxpayers saw their standard of living increase by around 3.8% thanks to the “flat tax”, according to an IPP presentation (PDF).
Another tax creation under the presidency of Emmanuel Macron, the real estate wealth tax (IFI) concerns households whose real estate assets exceed 1.3 million euros. In 2023, nearly 176,000 households paid this, for an amount of 1.9 billion euros in total, according to a note from the DGFiP (PDF). A return much lower than that of the ISF, which, in 2017, concerned 358,000 tax households (i.e. 1% of taxpayers) and had brought the State 4.2 billion euros, according to the Court of Auditors (PDF).
“Among households paying the ISF in 2017, around two thirds were no longer subject to the IFI in 2018”highlighted in 2023 a report (PDF) of France Stratégie, an organization attached to Matignon responsible for evaluating public policies. According to the IPP, the top 0.1% of wealthiest taxpayers saw their standard of living increase by 2.1% in 2022, thanks to the replacement of the ISF by the IFI.
The Public Policy Institute assessed, in a note (PDF) of 2022, the effects of tax cuts, coupled with various social reforms (increase in social benefits for employed workers, exceptional increases in certain benefits, etc.), decided during Emmanuel Macron’s first five-year term, for households. According to this note, the “average gain of these measurements For [l’ensemble des] households is 1.9% of the standard of living. “An effect due mainly to reductions in compulsory deductions”specifies the IPP. “On average”these measures had “a positive effect on household disposable income”summarizes the economist Paul Dutronc-Postel, co-author of this note, who notes “a higher standard of living for all categories of the population”.
This relatively homogeneous increase, however, masks disparities at both ends of the redistribution scale: “The winnings [en termes de niveau de vie] were only 0.8% for the poorest 5%, compared to 3.3% for the richest 1%.notes the IPP note. The researchers report “a quarter of losing households, and significantly higher gains for certain categories of individuals, particularly employed workers”. Unlike the abolition of the housing tax, which benefited all French households,“tax measures on capital [comme le PFU et le remplacement de l’ISF par l’IFI] have very concentrated effects, particularly on the top 1% of the richest”adds Paul Dutronc-Postel.
Will these overall gains be erased by the tax measures planned by the new government? Michel Barnier, who is due to unveil his proposed budget for 2025, announced Thursday October 3 an exceptional tax targeting the 0.3% of the wealthiest households. As for the Minister responsible for the Budget and Public Accounts, Laurent Saint-Martin, he promised Tuesday October 8 that there would be no “income tax increase” for the “middle classes”.