Taxes: 2 billion euros for the middle classes… Who’s worried? What levies or taxes will decrease?
Emmanuel Macron has announced a 2 billion euro tax cut for the middle classes by the end of his mandate. Who exactly would be affected and what form might these tax breaks take? The answers of Philippe Crevel, economist and president of the Savers’ Club.
Emmanuel Macron has promised a tax cut of 2 billion euros by 2027 for the middle classes. Who exactly would it be about?
The middle class represents half of the French population. With obviously extremely different situations depending on whether you are at the top or bottom of this population group. Emmanuel Macron aims for the first part of this class, with an income of 1500 to 2500 euros for a single person. If all the approximately 30 million French who are part of the middle class had been affected, this would have represented only a few tens of euros of tax breaks for each of them.
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Does this mean that two billion euros is not a large sum?
In comparison, the Yellow Vests had benefited in 2018 and 2019 from measures worth 17 billion euros, the abolition of the housing tax represents several tens of billions of relief. The abolition of the license fee alone cost public finances twice as much as this 2 billion euro.
What forms could these tax cuts take?
Emmanuel Macron seemed to favor labor income, which could lead to a drop in social security contributions, down to 2,500 euros of income. Another way would be to reduce income tax. Or expand the scope of the activity bonus beyond the current ceiling of 1,900 euros of income.
Hasn’t there been talk in recent weeks of a possible reduction in inheritance taxes?
Yes, it was an electoral promise from Emmanuel Macron. A very popular but politically very divisive measure. The president doesn’t want to rob the unions again, so he won’t lower the inheritance tax.
When could these reductions be implemented?
We can imagine the adoption and implementation in 2024. But the president has remained extremely cautious about the timing. He doesn’t want to commit himself because his room for maneuver is limited: growth is weak and Europe is starting to worry about our public finances.
Precisely, while the coffers are empty, is it reasonable to reduce taxes further?
From an economic point of view, I would say no. But the President of the Republic makes politics. He is emerging from a complicated pension affair, during which he has lost popularity, especially with his base, the middle class. This is why he has been multiplying ads for national education or health personnel for three weeks. And now for the lower middle classes.
How to compensate for this deficit of two billion euros?
There are three solutions. First, with a recovery in growth that would increase public revenues. But that depends on external factors, such as global growth, over which the executive has no control. Secondly, through budgetary savings, all the more difficult to find as Bruno Le Maire is already struggling to follow the budgetary trajectory set by the European Union. Finally, by an increase in the deficit and debt. That would be the worst solution, because, one day, the cost will have to be paid.