My 1% asset tax proposal - Detailed figures for France

The more I think about it, the more I think that a universal 1% annual tax on all assets could be a real game changer.

Yesterday, I talked about the figures provided by Savills Research that put the total value of real estate in the world at the end of 2017 at  280.6 trillion - up 6.2% in a single year. I also mentioned an earlier blog from Savills saying that the total figure for France was $6 trillion (with $4.7 trillion for residential property, and $1.3 trillion for commercial property).

This number was substantially smaller that the €10 trillion figure that I had been using.  But it turns out that even that number was too low.

In January 2020, the  French government statistics office (INSEE) published a detailed report on wealth in France, based on data obtained at the end of 2018. The key finding was that, "net national economic wealth amounted to 15,482 billion euros, or 8,0 times the net domestic product for the year. Pulled by the non financial wealth, and in particular by built land, it continued to grow, but at a slower pace than the previous year (+3,5% after +4,6%)."

The full report (in French) can be downloaded as a pdf file, and the figures as an excel sheet. But since  French accounting terms can be a bit obscure, I have generated an English version as a google sheet, which is shown here.

The bottom line is that a straight 1% annual tax (lets call it a "contribution") would in principle raise nearly €155 billion, although you would probably want to exclude the assets held by General Government (€303 billion), reducing the amount by about €3 billion. To be honest, I would personally say that it would be good to apply the tax to government too - it would be a simple accounting operation, but it would really make the point that everyone is in this together.

It's interesting to see that the totals for Financial assets and liabilities almost exactly cancel each other out (just €7 billion difference). But the financial assets of households exceeds the liabilities by nearly €3.7 trillion. For me, this wealth, held by the most affluent individuals should be added to the values for property (€7.37 trillion) that should be subject to the 1% tax. There are also some other numbers which are a bit difficult to identify, such as the €465 billion worth of "other non-produced assets" held by households. Overall, the €8 trillion of non-financial assets held by households is a nice number to have in mind.

It's also interesting to see that the fact that net financial assets are nearly balanced, despite the fact that households have a large excess. This is essentially due to the massive amounts of debt owed by non-financial corporations (€2277 billion) and by general government (€1813 billion - although, as we know, that number has gone up a lot since). It seems logical to me that my proposed universal 1% tax should only apply to net assets. This seems to imply that businesses would only have to contribute about €2.7 billion.

However, I think this would be wrong. A few days ago, I reported that  the top 57 French based companies have combined assets worth over $10 trillion. Some of this is due to the fact that the Forbes Global 2000 list includes many "financial corporations" - banks and insurance companies. But many of the top  57 companies are not banks - they are companies like EDF, Total, Renault, Sanofi, Orange, LVMH, Peugeot and so forth that are asset rich.  It could be that there are many thousands of smaller companies with such massive amounts of debt that net assets really do drop to just €2.7 trillion. If that is the explanation, it means that the net amount of revenue generated by a 1% tax on all company's net assets would be much larger that the €2.7 billion figure.  The thousands of companies with net debt would, of course, not pay anything. But the really big players (and especially banks) would contribute a lot. That seems fair and reasonable to me.

France is one of a relatively small number of countries that have had direct taxes on wealth.
There was something called the ISF (Impot sur la Fortune), which had a whole series of different rates - 0% under €800,000 increasing to 1.5% for fortunes over around €10 million. But in 2017, Emmanuel Macron's government scrapped it, leaving just a tax on property. It's been something of a tug of war between the left and right that has continued for decades.

But, it seems that all previous attempts to tax assets (whether non-financial or financial) have been targetted - applying only to those with above a certain level of wealth. And it seems to me that this is bound to cause real resistance. People with large amounts of wealth could naturally feel that they are being treated unfairly - increasing the temptation to avoid the tax by setting up trusts and other schemes in tax havens.

However, with my proposal, everyone with any assets would pay exactly the same amount - 1% per annum, with zero tax loopholes. It's much harder to argue against such a scheme.

First, given that the rate increase in the value of virtually all such assets has been going up by far more than 1% per year, it is very hard to argue that it would lead to hardship. If you know that everyone is making exactly the same contribution, it gets very hard to convince yourself that you are getting a bad deal.

Another argument that demolishes resistance is that since humans have lifespans that are rarely more than 100 years, even contributing 1% a year means that someone who is wealthy at age 20, will still have plenty left even at the end of their lives. Arguing that their descendants should keep everything is clearly unfair too.

So, I would like to make the proposal that this form of universal tax on all net assets could be a key to ensuring the future, not only of France, but for the entire planet.