INTERVIEW. Taxes: “The middle classes have not benefited from support measures,” says Eric Heyer
Emmanuel Macron asked this Sunday May 14 to reduce the taxation of the middle classes to “restore credibility to work”. Why target this segment of the population? The answers of Eric Heyer, director of the analysis and forecasting department of the French Observatory of Economic Conditions (Ufce).
The Head of State said this Sunday in an interview with the newspaper Opinion which intended to pursue a policy of lower taxation of the middle classes for incomes between 1,500 and 2,500 euros. How did you take the news?
Overall, this announcement seems quite relevant, since the purchasing power issues are very much focused on the middle classes. It is surprising, however, that the government is starting to launch targeted measures when it hasn’t happened for several years. Furthermore, many questions remain unanswered: is this slice of 1,500 – 2,500 euros of salary per month the most relevant? Does it better define the notion of “middle class”? On the other hand, does Emmanuel Macron intend to make these measures permanent? Finally, and this is the most important question, how does the Head of State intend to finance this support? At the moment, all this does not seem very clear.
Why target the middle classes?
Because unlike the more modest French, the middle classes have not really benefited from support measures during the last economic crises. We are not saying that households with the lowest incomes are not affected by inflation, but at least they have been able to count on some protective measures, such as the fact that social minima or the minimum wage are indexed to inflation.
Why not reduce the taxes of the richest?
This would make no sense, because contrary to what one might think, the richest have gotten richer during the last crises. First, during the health crisis they have accumulated significant excess savings – estimated at €172 billion by the Banque de France – and from which they can draw to offset inflation. On the other hand, these categories have not really lost income but rather assets: they have not found themselves out of work but have seen their assets collapse. However, for three years, the markets have been breaking record after record and are up again. The consequence is therefore that the richest French today are even richer, because they have earned both income and assets.
How should we view the taxation of our European neighbours?
It all depends on what taxes we are talking about. When it comes to income taxes, we clearly pay less than elsewhere. Let’s take the year 2019 so as not to be annoyed by the crises: at that time, personal income tax, CSG included, represented 9.6% of French GDP. By comparison, in Germany, it accounted for 10.7% of GDP in the same year and in Denmark, 27%! And this example can be declined with other levies, such as those on companies for example…
However, we often hear that France is “the world tax champion”…
Again, it depends on what is called “taxes”. If we talk about taxes in the strict sense, France is far from being on the podium of European countries. On the other hand, when it comes to compulsory levies and social contributions, then we are really not far from being the champions of the world.
How should they be distinguished?
The answer is one line: taxes, unlike social security contributions, do not give you any rights. Just because you pay more doesn’t mean you have more rights. Contributions, on the other hand, give you rights: if you contribute more to your pension than I do, you will automatically receive more aid when you leave your job.