IPP Policy brief n°37 - January 2019

The 2019 French budget: impacts on households

 IPP Policy brief n°37

January 2019

Authors : Mahdi Ben Jelloul, Antoine Bozio, Thomas Douenne, Brice Fabre et Claire Leroy

Contacts : brice.fabre@ipp.eu; claire.leroy@ipp.eu

…………………………

logo-pdf-minThe 2019 French budget: what effect it will have on households?

 

…………………………

Summary :

This brief studies the tax and social security reforms affecting households, introduced by the 2019 French budget, including the most recent measures announced in response to the “gilets jaunes” movement. The results reveal a mean increase in disposable income of nearly 1 % for a large share of households, mainly those receiving the in-work benefit (prime d’activité) and households affected by the reduction in the housing tax (taxe d’habitation). We also analyse the effects of the reforms implemented since the start of the current five-year presidential term, i.e. the cumulative effects of the 2018 and 2019 budgets. The mean gains across the whole population are qualitatively similar but hide large variations. The working population gains on average, regardless of living standard percentile (with a mean increase in disposable income of 2.4 %). In contrast, retired people in the most affluent 20 % of households are contributors, with a mean loss of disposable income of 3 %. The disposable income of the most affluent 1 % of households, regardless of whether they are working or not, rises by 6.4 % on average due to the replacement of total wealth tax (impôt de solidarité sur la fortune or ISF) with real estate wealth tax (impôt sur la fortune immobilière or IFI). The original budgetary measures proposed by the government in September 2018 have largely been amended by the emergency economic and social measures. These play a major role in the final redistributive effects. All income categories benefit from these new measures, with a mean increase in disposable income of 0.8 %. These eects are greatest between the 15th and 49th living standard percentiles, with a mean gain of 1.2 %.

Key points:

  • The 2019 French budget proposes a concomitant cut in mandatory contributions (down 10.2 billion euros according to the government) and in social benefits (down 1.4 billion euros), giving an overall increase in purchasing power of 8.8 billion euros for 2019.
  • Our simulations indicate increases in disposable income for a large section of the population: from the 9th to the 81st percentile, these gains are close to 1 %.
  • The working population gains on average due in particular to the switch from social security contributions (cotisations sociales) to the flat income tax CSG (contribution sociale généralisée) and to an increase in the employment bonus, whereas retired people in the most auent 20 % of households become contributors.
  • The socio-fiscal measures announced by the government at the end of 2018
    represent a mean 0.8 % increase in purchasing power for households.

Cette note avait été précédée d’une grande conférence mi-octobre 2018 sur l’évaluation du budget 2019 : pour accéder à la revue de presse (octobre > décembre) associée à ces publications, suivre ce lien