Michel Barnier's government is on borrowed time. Wednesday evening, we will know if the Prime Minister, who has pledged his confidence in the social security budget, saves his head or if he falls. In the – probable – hypothesis that a majority of deputies votes for the motion of censure, Michel Barnier will resign, and the social security financing bill would be rejected. As for the 2025 finance bill, it would then no longer be necessary.
Read also> A better revaluation of pensions, at 2.2%, in the event of government censorship
A direct consequence would be the “inevitable” increase in taxes for millions of French people, Michel Barnier assured Tuesday evening on France 2 and TF1. Indeed, the 2025 budget provides, as usual, for an indexation of the tax scale to inflation, with a 2% increase in the different tax brackets. In the absence of a vote on the 2025 budget, France will not go to the wall. The resigning government may propose a special law allowing the collection of tax, on the same basis as 2024 so that the “revenue” component is covered.
The middle classes would be proportionally the most affected
As for income tax, it will therefore be the 2024 tax thresholds which will be used to calculate the 2025 income tax. Michel Barnier specified that 18 million French people will automatically pay more than constant income taxes and that 400,000 new taxpayers will enter the income tax if his government was censored. Thus, in 2025, a single taxpayer, without children, would have to pay taxes from 11,294 euros and not 11,520 euros of annual income, as planned by the PLF 2025.
The Prime Minister relies on a report from the French Observatory of Economic Conditions (OFCE) published on October 1, 2024, which mentions more precisely the fact that 17.6 million French people will be taxed more if the scale is frozen, while 380,000 French people will become taxpayers “while they would be exempt if indexation of the inflation scale was practiced.”
-According to the OFCE, which worked on the basis of a freeze in the tax scale, it is mainly the middle classes who would be affectedthese households “belonging to the center of the distribution of living standards, that is to say households belonging neither to the poorest 30% nor to the wealthiest 20%”. For these households, the annual loss would be between 50 and 100 euros, while for the wealthiest 15% of households, the loss would exceed 250 euros. “The budgetary gains to be expected from a total freeze of the income tax scale are of the order of 3 billion,” explains the report.
The 3 solutions to avoid the tax increase in 2025
That's it for the numbers. However, the Barnier government's censorship does not automatically equate to an increase in taxes for these 18 million French people. There are several possibilities to restore the correct tax scale:
- When the special law authorizing the collection of tax, in the same framework as 2024, is presented, an amendment can be tabled to restore the new tax scale for 2025. This is notably the response from the RN side, which is based on a precedent from 1979. This solution seems to be debated among specialists of the French Constitution because since 2001, the budget vote has been governed by the organic law relating to finance laws (LOLF). “For my part, I do not see what could be opposed to it, if it is an amendment proposed by a parliamentarian. On the other hand, the resigning government cannot present a text including new measures in relation to 2024”, specifies Michel Lascombe, jurist and professor of public law, author of Constitutional law of the Fifth Republic (The Harmattan). As the increase in the tax scale appears to be a consensus, the amendment could be voted on without too much difficulty.
- A new government will be appointed, with the objective of passing an amending budget which will take over from the special law. In this budget, he will be able to pass the new tax scale. “This finance law will be passed as soon as possible and will have retroactive effect from January 1. It will establish the new tax scale and contrary to what is stated, the scale can be indexed to inflation and no one will be harmed” , explains the constitutionalist.
- There remains a possibility of passing the first part of the finance bill, which contains – among other things – the new tax scale via a special law but this remains very hypothetical… “Two conditions are necessary: that a full government – therefore not resigning – be appointed quickly and that it submits this bill before December 10”, specifies Michel Lascombe. A hypothesis which today seems difficult to imagine.
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