There is now a possible name for the future French Prime-Minister proposed by (most of) the New Popular Front coalition. She is the economist Laurence Tubiana. I quote from Wikipedia : "She served as France's Climate Change Ambassador and Special Representative for the 2015 COP21 Climate Change Conference in Paris, for which she became recognised as a key architect of the resulting Paris Agreement. Since 2017, she has been CEO of the European Climate Foundation". Interestingly she spent her early life as a member of the Revolutionary Communist League (1968-1976), but was later more closely associated with socialists including Lionel Jospin and François Hollande, and was even invited to join Emmanuel Macron. So, in terms of background, I would say that she has a lot going for her.
So, perhaps a bit prematurely, I would like to suggest to Laurence Tubiana some ideas that could be useful - several of which are already contained in the New Popular Front's program that you can find here.
The NPF's program includes a huge number of proposals. I am broadly in favour of the vast majority of them. Some of the ideas that I particularly like include the following;
- Make the first KwH of electricity free of charge. This is the first step to introducing Universal Basic Services - something which seems extremely sensisble. A household that was using energy frugally should be able to manage with no electricity charges at all. And it would end any possibility of people having their electricity cut off completely. I would do the same thing for water - again, every citizen should have a basic amount of water at no charge. Obviously, in both cases, you would have to increase the rates for people who use more than the basic amounts. But the change in rate would be small, and it would further incentivise people to use energy and water sensibly
- Introducing a kilometre tax on imported products. This is another simple idea that would help promote local production and reduce the ecological cost of shipping goods across the planet. It should not make sense to fly beans in from Kenya. I would rather that people in Africa get to eat their own food!
- Reintroduce a higher wealth tax (ISF) with a climate component. Details are unclear, but this would presumably mean putting back the taxes on financial assets that were abolished by Emmanuel Macron.
- Tax the richest people at European level to increase the own resources for the European Union budget. You may already be aware that I am a big fan of making changes to the taxation system at the European level to avoid claims that rich people can avoid taxes by moving their fortunes to more favorable regimes.
- Generalise the taxation of superprofits at European level. Again, the key is to do things at the European level.
- Introduce the Zucman tax on the profits of multinationals. The recently published Global Tax Evasion Report 2024, coauthored by Gabriel Zucman describes the problem in detail.
- Increased taxation of financial transactions. If you have been following my blog over the last 14 years, you will know that for me, taxing all financial transactions (including my financial transactions) would be a very simple way to generate almost unlimited amounts of funding.
- Eliminate inefficient, unfair and polluting tax breaks. This seems to be a simple and sensible proposal.
But I would like to suggest some additional ideas that could be included.
Firstly, I would strongly suggest that the propositions for Wealth Taxes should not have thresholds. Instead, you could have a flat rate 1% annual tax on all net wealth. The Banque de France published an extremely useful report in January 2024. It reports that Net Wealth for households in France stood at €14041 billion at the second quarter of 2023- up 23% in inflation adjusted euros since 2009. 54.2% of that wealth is held by the top 10%, whereas half the population (Deciles 1 to 5) only hold 5%.
There's a particularly interesting figure which shows minimum, maximum and average net wealth for the 10 deciles.
You can see that, if there was a 1% annual tax on net wealth, the poorest 10% of households would pay nothing. The next 10% would only pay an average of €40. On average, the poorest half the population would only have to pay an average of €462.
But at the top end of the scale, people in the top 10% would have to pay an average of €24,180. This would include people like me who own their own property. But that's only fair. The Banque de France report shows that the top 5% of households hold 41 % of the total wealth (€5708 billion to be precise). They don't provide figures for the top 1% and the top 0.1%, but last year we already knew that the top 500 people in France had a combined wealth of €1170 billion, around 8% of the total. It follows that since they each have an average of €2.3 billion, on average they would have to contribute €23 million a year. Note that these sums are minuscule compared with the increase in wealth that those 500 people have seen in just the last few years (their combined wealth was just €731 billion as recently as 2020).
One point that is not so obvious from these overall decile figures is that net wealth varies enormously with age. I would love to see how these net wealth figures vary between those in the twenties, and those who are in their fifties and sixties or retired. But it seems clear that most young people with families would end up paying very little - simply because even if they have managed to buy property, they will still owe the bank large amounts of money and therefore have negative net wealth.
And, of course, the wealth tax would be mainly paid by people who own property or businesses. People who rent their accommodation would probably pay little.
All of this seems extremely fair and sensible. The idea that it is better to tax income than wealth makes no sense. Taxes should be paid by the people who have the assets.
This brings me to one of the main areas where I have problems with the NFP's proposals. The NFP program is very keen on "progressive" taxes. They want to "Increase the progressive nature of income tax by introducing 14 tax bands", making the CSG progressive, and getting rid of the 30% flat tax on revenue from financial assets (dividends, sale of shares, rents etc).
However, I think that there is a much more rational way to do things. You can have a flat tax on income at, say, 30% that would be applied to all types of income - both earned income, and income from investments. Some might say that this is not a sufficiently high level of taxation for high earners. But the point is that people with wealth would be paying a lot more tax on their net wealth, so that the combination of 30% tax on all forms of income, plus a 1% annual tax on net wealth would mean that the wealthy would end up contributing far more.
At the same time, I would recommend not only getting rid of what the NPF describes as "inefficient, unfair and polluting tax breaks", but indeed all tax breaks. Everytime there is a tax break that is designed to promote desirable behavior such as installing a heat pump, solar panels or purchasing an electric car, it should be clear that there is an alternative approach. Get rid of the tax breaks, and replace them by direct subsidies which would be paid to anyone who installs a heat pump, solar panels or gets an electric car. One of the strongest arguments for such a change is the fact that using tax breaks can only work for people who pay income tax. Since roughly 50% of French citizens pay no income tax anyway, such incentives are clearly not going to work for many French citizens. Why should taxpayers money only be used to help the wealthy? Just give direct, unconditional subsidies to anyone who does the right thing. Easy. And fair.
The other point I would really want to stress is the need to eliminate means-testing. Many people in France are in the situation where they get government support but where this support is only available if they are not earning any other income. As soon as they start earning any money, they immediately lose at least some of their benefits. This may seem like an intelligent use of public resources - why pay benefits to people who don't really need them? In reality, such a system is a disaster. It means that the effective tax rate for people at the bottom can be as much as 80%. Suppose that you are currently getting income support of €100. Would it be in your interest to get a part time job that pays €100 a month? Not if the result is that you lose €80 of your benefits.
As a consequence, many people will be tempted to avoid taking on paid work at all, especially if they can do other useful activities like child care, looking after elderly relatives, or voluntary work. And those that are interested in paid work will be tempted to take on undeclared work. Part of that will be to avoid paying taxes and contributions, but a lot of it is motivated by a perfectly natural desire to avoid losing the modest support that they get from being unemployed.
So, in summary, my message to the new French prime-minister is simple. For sure, you should implement a large percentage of the proposals in the NFP's program. But try and be imaginative by adding some even more radical suggestions.
- an annual 1% on net wealth, to be paid by both individuals and households and by businesses
- elimination of all tax breaks
- elimination of all means-tested benefit schemes
- introduction of direct subsidies to citizens to encourage desirable behavior (including free public transport to encourage people to stop using their cars)
- introduction of a basic allowance for electricity and water
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