the essential
During his television interview this Tuesday, Michel Barnier repeated that “18 million” French people “will see their income tax increase” if the 2025 budget is not adopted. Is the Prime Minister telling the truth?
In the event of censorship by the government of Michel Barnier, the vote on the 2025 finance law will be compromised. And the Prime Minister reaffirmed, this Tuesday, December 3 on France 2 and TF1, that “nearly 18 million French people will see” their income tax increase” if this budget is not adopted.
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“Others will pay it for the first time because we have not been able to include in the finance law the reindexation which is planned, which I have planned for the scale of tax brackets”, specified Michel Barnier .
The passing of a special law
Concretely, to ensure the country's budgetary continuity despite government censorship, a special law plans to renew, identically, the finance law of the previous year. The State can therefore continue to collect revenue, but the income tax scale does not benefit from annual inflation indexation.
380,000 households would become taxable
The Prime Minister, like the Minister of the Budget Laurent Saint-Martin before him, is based on an OFCE study published last October. Economists calculate the consequences of freezing the income tax scale in 2025. “In total these are 17.6 million households who would see their income tax increase compared to a situation of indexation to inflation”, note the authors. “The budgetary gains to be expected from a total freeze of the income tax scale are of the order of 3 billion. In addition, nearly 380,000 households would become liable to income tax although they would be exempt if the scale was indexed to inflation.
The precedent of 1979
France has already found itself in a comparable budgetary situation. It was at the end of 1979, when the Constitutional Council censored the finance law for the following year. It was at this time that, for the first time, a special law made it possible to carry over the budget identically while awaiting the vote on a new finance law. An amendment to this law made it possible to index the tax scales to inflation.
Limited application time
The renewal of the 2024 budget can only be temporary. This was recalled this Wednesday, December 4, by Eric Coquerel, LFI deputy and president of the Finance Committee of the National Assembly, according to whom Michel Barnier “lies.”
“It is a text which aims to apply for a month, six weeks maximum, before discussing a budget. The 2024 budget is not expected to apply in 2025 but just to get through the end of the year so let's stop being afraid. It is not good to play alarmist and say that it is economic chaos,” he said.
