Income tax indexed to inflation: how the government promises to contain the number of new taxpayers

Not touch the purchasing power of the French.

This Wednesday morning, Bruno Le Maire, Minister of the Economy, had to go to the set of BFMTV / RMC to demine a potentially explosive subject.

“It is out of the question that employees pay more income tax or enter the income tax (IR) scale because of inflation.

A few days before the first round of the legislative elections, on June 12, the government quickly turned off a little music that was beginning to resonate.

What if the government did not index the income tax scale to inflation?

Not easily understood by most taxpayers, this technical measure would have had significant consequences on their wallets.

Indeed, in 2023, more French people could have been subject to income tax while others, with a sometimes minimal salary increase, should have sent a larger check to Bercy.

The reason ?

The galloping inflation recorded since the beginning of the year which reached 5.2% over one year in May, according to INSEE.

Unheard of since the early 1980s.

In 2012, 400,000 new households had to pay income tax

Usually, with inflation below 2%, as we have known for more than 20 years (except in 2008), taxpayers' incomes increase on average faster than the price index.

As a result, the indexation of the income tax scale does not prevent the tax rate and tax revenue from increasing.

But not this year.

The temptation could therefore be great for the State not to index the tax brackets to inflation in order to secure more resources.

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According to the Ministry of the Economy, since 1969, non-indexation has taken place twice, in 2012 and 2013. For 2012, when inflation was around 2%, 400,000 new tax households had to pay the IR.

This had brought in 1.7 billion euros in additional revenue.

Or, on average, 80 euros more tax for 20 million households.

And the beginning of a tax fed up.

Europe will ask for pledges

No question, therefore, of taking back with one hand what the State is about to give with the other.

As of this summer, to somehow maintain purchasing power, the current majority plans to increase retirement pensions by 4%.

According to Les Echos, the same rate would be applied for social minima.

A check for the most modest households is also in preparation for September while the index point for civil servants, which has not changed for several years and determines their salary, must also be revalued.

Not to mention the discount of 18 euro cents on the price of a liter at the pump extended until the end of August.

Billions of euros that will have to be financed, while Emmanuel Macron has pledged not to increase taxes under his second five-year term, that growth is running out of steam and that inflation in the euro zone will lead the European Central Bank (ECB) to raise its key rates.

The beginning of an increase in the French debt.

“At one time or another, Europe will say stop and ask Paris to tighten the purse strings, warns a source close to the executive.

Or at least, it will be necessary to send pledges.

And among the signals that should be launched, the highly contested pension reform.