Saturday, 16 October, 2021

Macron attacked again on the balance of his fiscal policy


OFCE economists publish a note showing the negative effects of the Head of State’s tax policy on the purchasing power of the lowest 10%. Bruno Le Maire, “challenged the spirit of this report, which is to say that more and more should be redistributed to reduce inequalities. “

Emmanuel Macron's tax policy was very favorable to wealthy taxpayers, then rebalanced after the movement of

Clearly, each assessment of Emmanuel Macron’s tax policy on household income has its flammable character. Latest, the publication of the OFCE this Wednesday on the budget measures for 2020 embarrassed even the highest levels at the Elysee. It shows their impact according to household income, from the bottom 5% to the top 5%.

As previous evaluations have shown, the tax policy at the start of the five-year term was very favorable to wealthy taxpayers due to the reform of the taxation of capital. Then it was rebalanced with the purchasing power measures decided in the aftermath of the “yellow vests” movement (lower income tax, end of housing tax, exemption from overtime, sharp increase of the activity bonus).

Read also:

Macron’s tax policy favors households from the “yellow vests”

Loss of purchasing power among the poorest

What appears new in the OFCE’s assessment is that the lowest 10% have clearly lost purchasing power since the start of the five-year term. And the purchasing power gains put forward by the government would only begin to be felt in the middle of the second decile, ie households earning more than 1,120 euros per month and per unit of consumption.

This assessment differs from a previous study by the Institute of Public Policy (IPP), published in October, and which resulted in a neutral effect for the most modest. As for the government, it estimates in its report annexed to the 2020 budget that the standard of living of the less well-off has increased by 2.3% since the start of the five-year term.

Battle of numbers

Embarrassed by this new beginning of controversy, the government quickly reacted. “The OFCE study does not take into account the increase in the recourse rate for the activity bonus, the effects of which are considerable, nor other social measures which are not in the budget”, we regret in Bercy, where we cite the example of social tariffs in canteens and the rest at zero charge in health.

Visiting the Salon des Entrepreneurs, the Minister of the Economy and Finance, Bruno Le Maire, “challenged the spirit of this report, which is to say that more and more should be redistributed to reduce inequalities.” “The best way to reduce inequalities is to give everyone a job,” he argued.

The OFCE study shows the impact of tax measures based on household income, from the lowest 5% to the wealthiest 5%.

The OFCE study shows the impact of tax measures based on household income, from the lowest 5% to the wealthiest 5%.

The other criticism of the government relates to taking into account the changes in behavior brought about by the reforms. The increase in tobacco taxation, which weighs heavily on low-income households, has led to a 10% drop in consumption, which ultimately limits its effects on the household budget.

Same reasoning for the reform of the taxation of capital, the cost of which turned out to be lower than expected, because it revived dividend payments. “We have taken these effects on behavior into account, but to a lesser extent”, defends Xavier Ragot, president of the OFCE.

Effect of return to work

The main novelty in the OFCE study is that it takes into account the impacts of the unemployment insurance reform. Hence the significant effects at the bottom of the distribution, which can be explained by the measure aimed at penalizing back and forth between short contracts. “People of modest means will be the first beneficiaries of a return to work”, responds the government, which highlights the 580,000 job creations since the start of the five-year term.

On the effect of this recovery in employment on the purchasing power of households, the government promises to publish an assessment soon. In the economic report appended to the 2020 budget, Bercy estimated that labor market reforms would have a positive effect of 2% on the disposable income of low-income households.

OFCE economists publish a note showing the negative effects of the Head of State’s tax policy on the purchasing power of the lowest 10%. Bruno Le Maire, “challenged the spirit of this report, which is to say that more and more should be redistributed to reduce inequalities. “

Emmanuel Macron's tax policy was very favorable to wealthy taxpayers, then rebalanced after the movement of

Clearly, each assessment of Emmanuel Macron’s tax policy on household income has its flammable character. Latest, the publication of the OFCE this Wednesday on the budget measures for 2020 embarrassed even the highest levels at the Elysee. It shows their impact according to household income, from the bottom 5% to the top 5%.

As previous evaluations have shown, the tax policy at the start of the five-year term was very favorable to wealthy taxpayers due to the reform of the taxation of capital. Then it was rebalanced with the purchasing power measures decided in the aftermath of the “yellow vests” movement (lower income tax, end of housing tax, exemption from overtime, sharp increase of the activity bonus).

Read also:

Macron’s tax policy favors households from the “yellow vests”

Loss of purchasing power among the poorest

What appears new in the OFCE’s assessment is that the lowest 10% have clearly lost purchasing power since the start of the five-year term. And the purchasing power gains put forward by the government would only begin to be felt in the middle of the second decile, ie households earning more than 1,120 euros per month and per unit of consumption.

This assessment differs from a previous study by the Institute of Public Policy (IPP), published in October, and which resulted in a neutral effect for the most modest. As for the government, it estimates in its report annexed to the 2020 budget that the standard of living of the less well-off has increased by 2.3% since the start of the five-year term.

Battle of numbers

Embarrassed by this new beginning of controversy, the government quickly reacted. “The OFCE study does not take into account the increase in the recourse rate for the activity bonus, the effects of which are considerable, nor other social measures which are not in the budget”, we regret in Bercy, where we cite the example of social tariffs in canteens and the rest at zero charge in health.

Visiting the Salon des Entrepreneurs, the Minister of the Economy and Finance, Bruno Le Maire, “challenged the spirit of this report, which is to say that more and more should be redistributed to reduce inequalities.” “The best way to reduce inequalities is to give everyone a job,” he argued.

The OFCE study shows the impact of tax measures based on household income, from the lowest 5% to the wealthiest 5%.

The OFCE study shows the impact of tax measures based on household income, from the lowest 5% to the wealthiest 5%.

The other criticism of the government relates to taking into account the changes in behavior brought about by the reforms. The increase in tobacco taxation, which weighs heavily on low-income households, has led to a 10% drop in consumption, which ultimately limits its effects on the household budget.

Same reasoning for the reform of the taxation of capital, the cost of which turned out to be lower than expected, because it revived dividend payments. “We have taken these effects on behavior into account, but to a lesser extent”, defends Xavier Ragot, president of the OFCE.

Effect of return to work

The main novelty in the OFCE study is that it takes into account the impacts of the unemployment insurance reform. Hence the significant effects at the bottom of the distribution, which can be explained by the measure aimed at penalizing back and forth between short contracts. “People of modest means will be the first beneficiaries of a return to work”, responds the government, which highlights the 580,000 job creations since the start of the five-year term.

On the effect of this recovery in employment on the purchasing power of households, the government promises to publish an assessment soon. In the economic report appended to the 2020 budget, Bercy estimated that labor market reforms would have a positive effect of 2% on the disposable income of low-income households.