2023-05-16 10:30:00
After the bitter pill of pension reform, the President of the Republic intends to send a positive message to the middle classes. In a daily interview L’OpinionEmmanuel Macron said, Monday, May 15, wanting “continue a trajectory of lower taxation” in their favor, before reiterating the promise, the same evening, during the 8 p.m. newspaper of TF1. If the course is clear, the terms remain to be specified and the principle is far from self-evident in an over-indebted France, which must overcome unprecedented challenges for which each tax revenue will be precious. Ecological transition, education, health: the financing needs are immense.
Would be concerned the French who earn a little too much to be helped by the social safety net, but not enough “to live well”with monthly incomes in a range of 1,500 to 2,500 euros, says Emmanuel Macron, while leaving the government to develop the mechanisms for this tax relief which should reach 2 billion euros over the entire mandate.
It is legitimate to be concerned about the purchasing power of the middle classes, who encounter real problems at the end of the month and who can end up expressing their dissatisfaction by voting for the National Rally. It is still necessary that the State has the means to continue to practice tax cuts.
Long-term mechanics
The presidential announcement comes at a time when French public finances are among the most degraded in the euro zone and when tax revenues are likely to experience a sharp slowdown in 2023 due to the slowdown in activity. In addition to the 52 billion euros in tax relief decided during Emmanuel Macron’s first five-year term, there is already a new reduction in production taxes for companies and the abolition of housing tax on the main residence of 20 % of wealthiest households.
By freeing himself from the warnings issued recently by the Court of Auditors and the Governor of the Banque de France, who call for caution on tax cuts not financed by a reduction in expenditure, Emmanuel Macron is taking a perilous crest line. The example of the government of Liz Truss in the United Kingdom, which shattered in the fall of 2022 under pressure from the financial markets, should be remembered.
Most public spending today consists of social transfers. It is not imaginable to attack it. The Head of State is therefore betting on the drop in “curative expenses” through policies of “prevention”. In terms of employment, for example, initially favoring apprenticeship makes it possible to lower the cost of unemployment benefits or the RSA in a second step.
The argument can be heard, but it is a long-term mechanic. When the loss of income from tax cuts is immediate, it will take several years for prevention policies to produce results. In the meantime, France will have to finance a wall of investments in the environment, education or health.
In this tense context, the planned tax relief will have to meet two prerequisites: be highly targeted and make it possible to generate additional tax revenue by increasing consumption and/or employment. The government will not be left with it. He will have to convince that this new gesture fits into the budgetary trajectory that he has developed until the end of the five-year term to reduce deficits and debt. This will be the most difficult, because already in the current state its copy is subject to caution.
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