"In reality, the legacy benefits the 'boomer' generation"

Claire Fournier is an economics journalist at LCI.

She is the author of

Rethinking Legacy

FIGAROVOX.- In a country picky with inequalities, 85% of French people believe that inheritance should not be taxed more

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Claire FOURNIER.-

It is striking to see that this country, so quick to denounce wage and income inequalities (between women and men, between bosses and employees) is so blinded by the rejection of this tax that it is ready to close eyes on the inequalities engendered by inheritance.

I think this paradox is explained by a lack of knowledge of the taxation that applies.

When we talk about inheritance rights, there is a general intuition that everyone is against.

To use Eric Ciotti's term during the presidential campaign, inheritance tax appears as a "death tax", a double penalty.

There is also an aspect which touches on a fundamental thing, that is to say the family and the children.

Inheritance rights are considered a spoliation of what one is entitled to pass on to one's children.

Read also“Why it would be a serious mistake to abolish inheritance”

In addition to this visceral feeling, there is a lack of knowledge of taxation.

In reality, 85% of inheritances are not taxed.

Spouses do not pay inheritance tax.

The debate during the campaign focused on "we must abolish inheritance tax".

Apart from the extreme left, everyone was consensual in saying that they had to be lowered.

Emmanuel Macron is rather going in this direction by proposing to increase the ceiling of the tax deduction both for children and for heirs in the indirect line, which is rather interesting.

Do we need to inherit when we are almost at retirement?

It is not to the children that the inheritance goes in priority but rather to the generation of the “boomers”.

Claire Fournier

You brush aside certain preconceived ideas of those who would like to lower inheritance tax: this would deter people from working and saving, we hear.

According to you, individuals do not save to bequeath their due to their offspring?

Yes, the meaning of saving today is rather to ensure a comfortable life when one reaches the age of the fourth.

These are new issues.

There is a form of precautionary savings for these old days to avoid the children having to pay for the retirement home or home help.

It is much less a savings to pass on to his descendants.

In the 1980s, we inherited at 42, whereas today, if we mature in 2030, it will rather be at 55.

Do we need to inherit when we are almost at retirement?

It is not to the children that the inheritance goes in priority but rather to the generation of the “boomers”.

You have to keep in mind that the heirs are getting older and older.

You say that lowering inheritance tax would even be counterproductive.

American economists have shown that those who receive an estate when they are of working age lose the motivation to seek employment...

I am inspired by the United States.

When I lived there, Warren Buffett and the Gates couple had announced that they were giving up a large part of their fortunes to foundations.

I was inspired by American liberals, like Carnegie, who said that leaving too much money to his heirs wasted their potential, because they would not have the ability to develop their abilities if they inherited too much money.

American economists have in fact shown that heirs who receive an estate when they are of working age lose motivation to seek employment, and even take early retirement more easily.

In their research, they showed that inheriting $150,000 multiplied by four the chances of leaving the labor market compared to someone who inherited $25,000.

They called it the "Carnegie effect", named after the famous billionaire patron.

I call it the negative effect of inheritance on our economy.

I write my remarks in a society that is increasingly unequal.

Claire Fournier

Should we deplore the fact that the accumulation of capital and productivity gains allow those who benefit from it to work less if they wish?

Isn't the goal of societies to lighten the pain of men?

Yes, but that would mean that part of the population can afford to be idle thanks to their parents and grandparents, while another part would not have this leisure.

The title of my book is “If we stopped transmitting inequalities?”

I have nothing against people who inherit and then don't work or retire early.

But I write my remarks in a society that is increasingly unequal, 50% of French people will inherit nothing.

The observation made by Thomas Piketty shows that our societies are as unequal as in Balzac's time in terms of heritage.

More recently, in the 1970s, the share of inheritance in heritage doubled, from 35% in 50 years it rose to almost 60%.

Liberal thinkers like Carnegie and Rothschild who started setting up foundations had a good perspective on all that money that might not be put to good use.

For them, as it is necessary to redistribute to the society from which one has benefited, the heirs should not capture all the family money.

You could be told that legacies are the quintessence of human fraternity...

In the United States, the fraternity was very quickly taken over by wealthy patrons, because in fact there was not a strong welfare state.

In France, you don't have that system of charitable organizations because it's public funding that irrigates health, education, information, and so on.

Sarah El Haïry, Macron's minister who had worked on a reform of the hereditary reserve said that with the Covid crisis and the rise in inequality, the state could not do everything.

In France, we did not have the necessary structures in place, the necessary funding, to allow private companies that so wished to invest more extensively in causes of general interest.

Lowering inheritance tax does not encourage donations and bequests at all, which are already not very strong in France compared to other countries such as the United States or countries which do not benefit from a State strong providence like ours.

Choosing more to whom we transmit does not seem to me to be a marked bias.

Claire Fournier

You propose solutions to improve our system.

How to do ?

I tried to offer solutions, whether left or right.

The reform of the hereditary reserve, which is the share of inheritance reserved for children up to 75% for three children, two-thirds for two children and 50% for one child, is a measure that one could say is neither right , nor left.

Choosing more to whom we transmit does not seem to me to be a marked bias.

The right measure which is to multiply the reductions over time, I only retain it if it allows the capital to be directed to a younger person.

The heirs are getting older, while it is the young people who most need to have capital to get started in life.

For example, Germany adopts a more advantageous taxation for a donation to the youngest.

Next, the left-hand measure is the capital endowment.

Once again, this is to facilitate access to capital for younger people.

Thomas Piketty proposes a sum of 120,000 euros for each Frenchman and each Frenchwoman at the age of majority.

The question arises: what is done with this money?

Doesn't this imply generalized real estate inflation because many of the beneficiaries will probably use this money for a real estate purchase?

There are more reasonable proposals from Macronists, for example, or from Anne Hidalgo who say that each young person should be provided with 5,000 euros.

It's not huge, and that's not going to reduce inequalities, but at least we're doing something, we're allowing the youngest to have a little nest egg to start a business.

Directing money towards young people seems to me to be a preferred option.

Being able to do what you want with your inheritance by modifying the hereditary reserve, taxing the “very rich” as the left says, all right, but on condition that you tax the small and medium estates less.

Otherwise, it doesn't seem interesting to me.

We may also be able to allow donations to grandchildren.

Today it is possible, but it requires the agreement of the intermediate generation.

Rethinking Heritage, What if we stopped transmitting...inequalities?

(Ed. of the Observatory)

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