Tax equity means taxing the ultra-wealthy
The bill, which was adopted by the Assemblée Nationale after a first reading, was firmly rejected by the upper house of Parliament, which is dominated by the right and centrist parties. Though it had little chance of being successfully passed, it raised a pertinent question: Is it acceptable for average French citizens to have their incomes taxed at nearly twice the rate, proportionally, as a billionaire?
While the average French taxpayer faces a combined tax rate (both income tax and welfare contributions) of 50%, the figure drops to 27% for a billionaire. This disparity, which was highlighted in a 2023 study by the Institute for Public Policy (IPP), is explained by ultra-wealthy individuals' ability to use tax optimization techniques. Although legal, these mechanisms lead to the tax system becoming, beyond a certain threshold, regressive.
To address this, Gabriel Zucman, the economist who inspired the bill, supported by Olivier Blanchard, former chief economist at the International Monetary Fund, and Jean Pisani-Ferry, the architect of Emmanuel Macron's 2017 economic platform, has recommended creating a 2% minimum wealth tax on households whose net worth exceeds €100 million. In total, the measure targets 1,800 taxpayers. This is a narrow tax base, but one that could potentially generate between €15 billion and €25 billion in revenue.
The tax would not only apply to income streams that largely evade taxation, but also to professional assets, which have, so far, been tax-exempt. Some side effects should not be overlooked: For example, the founders of young companies, the market valuation of which pushes their creators into the ultra-wealthy category, may not have access to the liquid assets needed to pay such a tax. Market valuations are virtual, and can fluctuate rapidly, which could complicate the process of calculating the tax.
Tax exile is another concern. However, to put this argument in perspective, Zucman has cited studies that show that when a wealth tax is introduced, the number of people who leave the country to avoid it remains marginal. However, this level of wealth tax has never been tried, and the demographic in question is also the most able to relocate abroad. "Do you really think that if France alone introduces a tax on wealth over €100 million, people will politely stay to be taxed?" said President Emmanuel Macron on May 13, arguing for a global, coordinated initiative. The problem is that such an endeavor will take a long time to come to fruition, even though it was put on the G20's official agenda in 2024.
At a time when reducing France's debt has become a collective necessity and requires effort from everyone, the debate must continue without either the left or the right spouting condemnations on the issue. To suggest that a tax on billionaires would solve the country's public finances all by itself is a fantasy, but defending the status quo, on the grounds that the richest individuals are not restricted by borders, is harmful for the fragile social contract that still unites the French people.
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