French President Emmanuel Macron announced on Monday evening tax cuts of up to €2 billion for the French people. The announcement targets France’s middle class, which has borne the brunt of high inflation and stagnating salaries over the past few months.
Speaking in a televised interview hosted by French national broadcaster TF1, President Emmanuel Macron on Monday evening said that his government is planning to propose tax cuts of up to €2 billion to boost the French people’s purchasing power.
The cuts are mainly aimed at “French women and men who work hard to try to raise their children but run out of money by the end of the month due to rising costs of living”, Macron said, adding that his goal is to increase the disposable income of the French middle class.
The government’s new fiscal policy, however, does not directly translate into a decrease in income tax. According to Macron, the government is still exploring different ways to reduce the financial burden on households.
“I don’t want to shut any doors here, there are quite a few intelligent ways [to achieve tax cuts] through [reducing] the social security contributions of employees,” Macron said.
Meanwhile, the president failed to provide an exact timeline for the planned tax cuts except to say that they would be put in place by the end of his mandate in 2027.
The French middle class
Despite Macron’s rather vague description last night of the French middle class he is looking to bolster, the president had provided a clearer picture late last week.
In an exclusive interview with French daily L’Opinion published Sunday evening, Macron spoke of the middle class as being those who take home between €1,500 and €2,500 per month, the equivalent of 1.08 and 1.81 times the minimum wage (€1,383 per month). This represents a little over 50 percent of the population based on statistics from France’s National Institute of Statistics and Economic Studies.
The French middle class, according to the president, is made up of those “who are too rich to receive aid and not rich enough to live comfortably”.
Macron’s definition, however, is far from ubiquitous among economists and statisticians.
The French Observatory of inequalities defines the middle class as that 50 percent of the population situated between the poorest 30 percent and the richest 20 percent.
The Organization for Economic Co-operation and Development (OECD) has set a wider definition that sees up to 68 percent of the French population as middle class, with incomes varying between 75 percent and 200 percent of the median.
Meanwhile only 40 percent of the population, situated between the richest 10 percent and the poorest 50 percent, is considered as belonging to the middle class by French economists Thomas Piketty and Lucas Chancel.
Reclaiming public favour?
Macron seems to be on a mission to win back public support following the heavy backlash that he has been facing ever since his government forced the deeply unpopular pension reform bill through parliament without a vote two months ago.
Besides announcing the planned tax cuts, Macron has taken care to underline several fiscal measures aimed at improving French people’s purchasing power that have been adopted by his government.
France’s ministry of economics and finance last year revealed tax cuts totaling €52 billion during Macron’s first five-year mandate.
“The tax cuts that we’ve passed are entirely focused on the middle class,” Macron said as he pointed to previous tax cuts such as the decrease in employee social security contributions, suppression of the housing tax and an €4 billion income tax cut that was introduced after the yellow vest movement.
Last year, the government also abolished the TV licence fee for French households.
The president, however, did not mention the wealth tax that was abolished late 2018 and replaced by a flat tax of 30 percent on wealth and a tax on real estate at a cost for the treasury estimated between €3.2 and €5.1 billion per year.
Having yet to prove its efficiency on boosting the French economy as the government promised, the abolition of the tax, a move that was heavily criticised at the time, has seen France's richest 0.1 percent get even richer according to a report published by policy discussion body France Stratégie in 2020.
The price to pay
While Macron’s announcement may come as a pleasant surprise for some, for others it resembles a political diversion.
Pointing to French protesters’ unquelled anger over the pension reform law, far-left party La France Insoumise coordinator and MP Manuel Bompard told news channel BFMTV Monday evening that Macron’s newly announced tax cut is an attempt to divert attention from anti-pension reform protests.
“We’ve just taken away two years of retired life from people and we’re telling them not to worry because of a €2 billion tax cut,” Bompard said.
“Besides, tax cuts like this don’t mean much if no details are revealed … despite him [Macron] saying it’s for the middle class, we must remember that Macron’s first five-year mandate can be summed up by policies favouring the country’s richest 0.1 percent,” he said.
French economist Thomas Porcher, meanwhile, said Macron’s tax cut reveals the government’s failed attempt to increase wages.
“If we can’t increase wages, then we decrease social security contributions to boost take home income,” he said, adding that the result isn’t always positive.
“If you give more purchasing power to an employee but take away the unemployment and retirement benefits, [then] he is still losing out,” Porcher said.
