The economic debate between the two presidential rounds focuses on purchasing power. Rather than reserving aid for needy households, several measures proposed by Marine Le Pen and Emmanuel Macron are aimed at an electorate that is unaware of the end of a difficult month, with the double risk of widening inequalities by making a tax gift. and distort competition between companies. By Jérôme Mathis, Professor of Economics at Paris Dauphine-PSL University and member of the BSI Economics think tank.
Some proposals aimed at supporting purchasing power take the form of tax breaks for the affluent classes. This is the case with Marine Le Pen’s proposal to exempt those under the age of 30 from personal income tax. A gift for the sole purpose of taxpayers. This excludes the single person who charges 1.2 SMIC, and the couple with two children who charges 3 SMIC. This exemption would only benefit young households above this income. And, due to the progressive scale of the tax, the advantage would automatically increase with the income level. When the employee paid 2,000 euros a month, an annual tax equivalent to half the salary (1,000 euros) would be saved.the senior executive paid 4,800 euros would save the equivalent of two salaries (9,600 euros), or almost 10 times more.
President Macron also proposes to offer tax breaks that could well widen inequalities with a reform of inheritance tax so that each direct heir benefits from a tax exemption of up to 150,000 euros, compared to the current 100,000 euros.
The bill for the taxpayer is huge
Energy is at the heart of purchasing power. Le Pen offers to reduce VAT from 20 to 5.5% on gasoline, fuel and gas, while Macron would expand its tariff shield (freezing of gas prices, limitation of regulated electricity prices, fuel rebates) for as long as necessary. If assistance to certain occupations (farmers, domestic workers, truckers, taxis, etc.) is needed in a context of energy price inflation, you will extend this measure indiscriminately to all users, including drivers of sports cars or sedans and families occupying large homes that need to be warmed up in the winter, is not justified. Especially because extending this aid to all French people increases the cost considerably. Or the bill for the taxpayer is huge. The Ministry of Economy estimates, for example, that the energy tariff shield should cost more than 20 billion euros by 2022.
The injustice of certain measures is not limited to the individual sphere. Some may operate to distort competition between companies. To continue her electoral ploy to seduce young people, the RN candidate pledges to abolish corporation tax for entrepreneurs under 30 years of age. A tax exemption that would offer the opportunity for a young entrepreneur to “lower” prices compared to his thirty-year-old competitor, who, like other older entrepreneurs, will have to pay 25% tax.
In the entrepreneurial field, the outgoing president intends to impose a profit-sharing system (Macron bonus, shareholding or profit-sharing) on any company that pays dividends. An attractive idea at first glance for anyone who sees it as a way to force companies to better share their profits with their employees. Beware, however, of the distortion of competition with large listed companies. The latter can easily, if they wish, waive the payment of a dividend and remunerate their shareholders by raising the share price. GAFAMs are the world champions of this practice. They do not pay dividends and prefer to burn their cash by buying shares. To the point that their market capitalizations are breaking historical records. Like Apple, which alone is now worth more than the 40 CAC 40 companies together. Therefore, it cannot be said that the practice is not well received by shareholders. On the contrary, despite being deprived of dividends, they find their account reselling their more expensive shares than they bought them.
This electoral stance raises a question of fiscal justice : Why include wealthy households in purchasing power support measures? Each of these measures, if implemented, would penalize our public finances and thus undermine our wealth redistribution apparatus. Limiting aid to those who really need it would, on the contrary, be more economically efficient and more socially just.
There are pragmatic and less electoralist solutions to support the purchasing power of the poorest households. For example, limited spending is an important part of your purchasing power. However, we know that many homes give up administrative procedures because they lose motivation in the face of procedures that seem complex. Specifically, some are discouraged by the idea of terminating a contract with a provider (car or home insurance, internet and television, mobile phone, etc.) to sign another contract, less expensive, with the competition. Especially because the dematerialization of certain devices discourages people who are not comfortable with digital tools.
Others do not assert their social rights such as housing assistance (APL), active solidarity income (RSA), activity allowance, back-to-school aid or even education aid for children with disabilities. In question, discouragement, but also lack of information as millions of citizens do not know exactly if they are eligible. This phenomenon is massive. For example, it is estimated that, every quarter, one in three eligible people does not use the RSA, ie about 600,000 households who would give up an average of 1,250 euros in benefits per quarter.. The remedy would be to establish an “origin” payment of social minimums to automate benefits. A broad public service transformation project in which President Macron says he wants to participate if re-elected.
Support for purchasing power is interpreted by many French as a struggle against economic inequality. In fact, some election promises claiming to have it would have the opposite effect. In particular, those that are specified in tax aid granted to households that are not among the most modest.
By Jérôme Mathis, Professor of Economics at Paris Dauphine-PSL University and member of the BSI Economics think tank.
Sources: The figure on non-recovery of the RSA was published in February 2022 by DREES. See Cyrine H., R. Le Gall, L. Omalek, and C. Marc (2022): “Regularly Measuring Non-Use of RSA and Activity Bonus: Method and Results,” DREES Dossiers, 92 .
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