Who's Winning From Emmanuel Macron's Tax Reforms? The Wealthy

Who's Winning From Emmanuel Macron's Tax Reforms? The Wealthy

Yellow vest protestors in Paris hold a banner reading "If the wealthy give back the money there will be no more needy," on Dec. 22, 2018.

SourceSAMEER AL-DOUMY/AFP/Getty

Why you should care

The rich are getting richer from regulatory changes in France, despite the yellow vest protests.

France’s richest 1 percent remain by far the biggest winners from President Emmanuel Macron’s tax policies, even after the emergency measures passed in December to appease anti-government protesters.

The figures will reinforce the perception that Macron has favored the rich, and is likely to fuel calls for him to restore or replace the wealth tax — something he scrapped shortly after taking office, though it brought in about $5.7 billion from 351,000 rich households in 2016. Taxation is on the agenda of an ongoing “national debate” intended to reduce tensions, but Macron has made it clear that reinstating the wealth tax is off-limits, which has been a bone of contention with protesters.

Top-earning French households will see their disposable income rise 2.3 percent as a result of changes taking effect in 2019, compared to a rise of 1.7 percent for middle-income taxpayers.

That’s according to a new analysis published by the Institut des Politiques Publiques (IPP), a think tank. The gains are largely because of changes in tax on capital income. Reforms since the start of 2018 have had a bigger effect than the new changes for the very wealthiest. Disposable income rose 7.9 percent for around 150,000 households and by an average of 17.5 percent for the top 30,000 because of last year’s reforms.

A package of tax cuts and handouts rushed through at the end of last year in an effort to defuse the protests has gone some way toward redressing the balance, targeting a few of the groups who have filled the ranks of the gilets jaunes movement. The IPP said tax and benefit changes taking effect over 2018 and 2019 would benefit a large part of the population, with most employees gaining at the expense of wealthier retirees.

However, some of the gains will only filter through this year, and most households will benefit to a much lesser degree. The IPP said changes taking effect in 2019 would boost disposable income by around 0.5 percent for those with lower-than-average incomes, between the ninth and 24th earnings percentile.

The poorest 10 percent of households are likely to lose out because many of them will not benefit from tax cuts for employees, and rely on welfare payments that are not rising in line with inflation.

The IPP said the emergency measures instituted in response to the yellow vests would benefit households across the income distribution, boosting disposable income by 0.8 percent on average compared with the original budget plans.

The freeze on fuel taxes, combined with more generous fuel subsidies, will benefit poorer households most, as will front-loaded increases in payments to low-wage workers. Middle-income retirees win a reprieve from a tax increase previously penciled in, while scrapping tax on overtime will largely benefit higher earners.

+
By Delphine Strauss

OZY partners with the U.K.'s Financial Times to bring you premium analysis and features. © The Financial Times Limited 2019.

OZYAcumen

Numbers and factoids — fodder for your next cocktail party.