Connect with us

Economy and business

A flood of taxes: this is what awaits France if the ecological left wins. Taxes up to 90% of income



Since the dissolution of the National Assembly on June 9, Manon Aubry has been busy in the media. The 30-year-old, who led the La France insoumise (LFI) list in the European elections, has had no time to savor her re-election in Strasbourg. Faced with the threat of a far-right rise to power after the July 7 early parliamentary elections, the former Oxfam France ‘Tax Justice and Inequality’ advocacy manager had to get right back into the campaign. And this time under the banner of the New Popular Front (NFP), the electoral alliance formed by the main left-wing parties (La France insoumise, the Socialist Party, Europe-Ecologie-Les Verts, and the Communist Party).

As reported by La Tribune, This Wednesday, June 19, speaking with Laurence Ferrari on CNews, he sought to reassure viewers about the major tax reform envisioned in the PNF program. Specifically, the big bang in terms of income tax, which should create “a redistribution shock,” “All those who earn less than 4,000 euros (net, ed.) a month, or 92 percent of the French, will not pay as much tax; they will pay less,” he promised.

A scale with 14 bands

To make richer families contribute more, the Left plans, when it arrives in Matignon, to “increase the progressivity of the income tax to 14 brackets.” This measure is not a surprise. It was already included in the agenda of the Left-led New Popular Ecological and Social Union (Nupes), an electoral alliance that was formed just before the general election of 2022.

While the New Popular Front’s proposed income tax scale is not mentioned specifically in the program that was thrown together in a matter of days following its dissolution, the general contours are exposed in an amendment that LFI deputies filed to the Finance Law for 2022.

The scale increases by 5 points (1 percent, 5 percent, 10 percent, 15 percent, etc.) until it reaches the stratospheric rate of 90 percent for incomes above 411,683 euros a year. From this threshold on, the Left ‘takes it all,’ to paraphrase former Communist Party General Secretary Georges Marchais.

“Income tax is already hyperconcentrated,” observes Alexandre Maitrot de la Motte, professor of public law at the University of Paris-Est Créteil. Bercy’s statistics are well known: 10 percent of taxpaying households pay 70 percent of the income tax. And less than half of all households (45 percent) pay this tax, which will turn 110 years old on July 15.
With this kind of progressivity, it is to be expected that there will be a real emigration of French citizens, not so much to fiscal havens but, much more simply, to neighboring countries, such as Spain or Italy, which have a progressive tax but not to the level of proletarian expropriation. In the end, a castle in Piedmont is not that much different from one in France.

Back to 1983

The idea of introducing a tax scale of 14 tax brackets was in no way a tax “invention” of the New Popular Front. Above all, the idea marks the Left’s desire to turn back the clock 40 years. It was in the 1983 Budget Law that the government of Socialist Prime Minister Pierre Mauroy added a 14th bracket to an income tax scale that already had 13 brackets since 1979.

Mitterrand’s left wing then opted to increase the tax burden on the wealthiest households. “In 1986, the 14th and final bracket had a marginal rate of 65 percent for incomes above 241,740 francs (about 48,000 euros in 2014),” explains a note from the Institute of Public Policy (IPP).

Admittedly, the marginal tax rate (TMI) was much higher at the time than the current scale-the final bracket is 45 percent for incomes of 177,106 euros or more—but at the time, the CSG (general social contribution) did not yet exist and a 20 percent exemption applied to most incomes,” adds Alexandre Maitrot de la Motte. So the 14th bracket would be much heavier today and, more importantly, would not be the only extra tax.

Tax on large fortunes

A year before revising the income tax scale, French President François Mitterrand implemented another of his election promises. Starting January 1, 1982, the Socialist introduced an annual tax on large fortunes (IGF) “when the value of assets exceeds 3 million francs (1,157,000 euros in 2023, ed.).”

At that point, families who own capital are deemed to have a greater ability to pay taxes than others,” the academic continues. And the tax on large fortunes is designed as a complementary tax to the personal income tax rather than as an independent tax.”

Its recent enactment, the wealth tax (ISF), reintroduced by Michel Rocard in 1992, will be transformed into an estate tax (IFI), effective January 1, 2018, by President Macron. A reform that the New Popular Front intends to reverse. Thus, the left plans to recreate a “solidarity tax on wealth, reinforced with a climate component,” which would bring in “15 billion euros” per year.

International competition

According to Victor Fouquet, this tax increase program, based on past experience, is not without risk to the French economy. This is the problem with thinking about taxation exclusively in terms of redistribution,” points out the law doctor who specializes in taxation. We no longer see very strong disincentives for taxpayers to save and work.

Not to mention the problem of international tax competition. With these conditions, the middle class, not just the super rich, will have a vested interest in moving elsewhere. For example, they will be able to sell their houses in Paris to buy two in Italy or Spain.

The Constitutional Council

One major obstacle remains in the path of reform of the New Popular Front: the Constitutional Council. Based on the principle of equality before the law, the Council ruled that “this requirement would not be met if the tax were confiscatory or imposed on a category of taxpayers a burden excessive in relation to their ability to pay.” In this context, we remember the criticism of President Hollande’s proposed 75% tax, which was to be levied on the portion of income over one million euros, by the Wise Men of the Rue de Montpensier.

“According to Alexandre Maitrot de la Motte, “the measure to modify the income tax scale, proposed by the New Popular Front, appears doubtful in terms of constitutionality.

Especially since the Left also plans to “make the CSG progressive,” “abolish the flat tax” introduced by Emmanuel Macron in 2018 to tax capital income the same as labor income, and “unfair and polluting tax loopholes.” Taken together, these measures would undoubtedly increase the tax burden on wealthy households disproportionately for the Constitutional Council.

However, the consequences on France of this sea of taxes will be devastating. The danger is extremely realistic if the Macronian centrists, as they have already stated, support the extreme left of LFI against the Rassemblement Nationale in the second round. At that point, the French will have one more reason to curse Macron.

Click to comment

Leave a Reply

Your email address will not be published. Required fields are marked *

Copyright © 2024 Scenari Economici - P.IVA: 02570830063