Tax cuts and social aid: a very variable benefit according to the French

Posted Nov 22, 2022, 6:00 PM

All the tax and social measures implemented by the government have increased household disposable income by 12.7 billion euros in 2021. This is shown by an INSEE study published on Tuesday, which has measured the contribution of the systems in force in 2020-2021. The methodology consists of comparing what has been done with a scenario in which the French would not have benefited from any support measure. In detail, last year, an individual recorded a gain of 280 euros on average. It reaches 600 euros on average on a family scale.

The study indicates that “90% of this increase comes from permanent measures, mainly related to direct debits”. Among them, the decrease in the tax rate on income for the first bracket of the scale, with a rate lowered from 14% to 11% in 2020. This was one of the government’s flagship measures to support the middle classes following the crisis of the “yellow vests”. Another tax gesture taken into account: the continuation of the reduction of the housing tax in 2020 and 2021. The indexation of certain benefits, the revaluation of the minimum old age or the extension of the youth guarantee in 2021 complete the list.

Profit for the wealthy

The weight of the tax component in the measures explains why the 50% of the wealthiest French people, that is to say those whose disposable income is greater than 2,000 euros per month, have recorded more marked gains. It is this category of households that pays income tax (55% of the French do not pay it).

For this half, the measures have added 420 euros in standard of living on average, against 130 euros for the other. But if we compare the poorest 10% and the richest 10%, the gain represents 1.1% of the standard of living for the former, and 0.7% for the latter, underlines Bercy.

“The exceptional payments intended to mitigate the effects of the health crisis in 2020 and the rise in energy prices in 2021 are the main factor in raising the standard of living of the poorest 20%”, underlines the ‘Insee. Among these measures, we find in particular the increase in the back-to-school allowance in 2020, the bonus of 100 euros energy check in 2021 reserved for nearly 6 million French people or inflation allowance of 100 euros, which last year targeted the 38 million people earning less than 2,000 euros per month.

Insee has also analyzed measures that do not fall within the strict definition of the standard of living. Thus the 2020 increase in the tobacco tax reduced household income by 2 billion euros and affected more the French people with the lowest standard of living. The amount is around 50 euros on average over the year for everyone.

Prime Macron

The effect of the social and tax exemption of the exceptional purchasing power bonus scheme (“ Macron bonus “), which entered into force in 2019, was measured for the first time. Assuming that without the device, companies would have paid only 40% of the amounts, INSEE estimates that the exemption led to an increase in disposable income of 190 million. The impact was positive for 2.7 million households, each benefiting on average from an additional 70 euros per year.

As a reminder, the amount of bonus distributed amounted to nearly 2 billion euros in 2021, for 3.4 million employees, i.e. an average of 570 euros per beneficiary employee.

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