Tax Cuts – We Must Stop What You Lose!

“The Court emphasizes the need to safeguard general government revenues. » This little phrase of the report on “The situation and perspectives of public finances” published by the Court of Auditors on July 7, seems to have gone unnoticed. If the institution does not deviate from its usual mantra about the need to control spending, deficits and public debt, it dedicates several fascinating pages to a very interesting but absent message from the economic policy debate: no more tax cuts!

The report is written in the technocratic style of the Court, but the reality of the figures, rendered in black and white, is cruel for President Macron. Just before the pandemic, for the years 2018-2019, “The reduction of mandatory rates reaches almost 40,000 million euros” compared to the beginning of the five-year period.

Since then, with the continuous reduction of the housing tax, the gradual reduction of the corporate tax rate and the decision to eliminate part of the taxes on production, “The new measures represent a reduction in mandatory deductions of almost 25,000 million euros between 2019 and 2021”. So why stop on such a good road?

“The new measures already in force and those announced by the Government could lead to a global drop in taxes of the order of 15,100 to 15,800 million euros in 2022”says the Court.

Whatever you lose!

In five years, Emmanuel Macron has thus eliminated 80 billion euros of permanent tax revenue. Economic commentators are very insistent on the “whatever the cost” of the President’s spending. Let’s not forget now to add the “what you lose” recipes!

The OECD has shown that we will not be able to control public debt in the long term without raising taxes. Crazy the rulers who go the other way

During her general policy speech, Prime Minister Elisabeth Borne asked “stop believing that for every problem, the solution is a tax”. We gladly replied that it would also be good if the government stopped thinking that the solution to every problem is a tax cut.

In a report published in late 2021, the OECD has shown, based solely on increased spending on pensions and healthcare, that we will not be able to control public debt in the long term without raising taxes. The rulers who go the other way are crazy. They are preparing for future public debt crises in their countries.

Because beyond spending on pensions and health, the needs are immense between education, research, ecological transition and adaptation to climate change, not to mention the investment spending necessary to increase our economic sovereignty.

And, except to end our public services and definitively discourage those who would like to work in them (caregivers, teachers, etc.), working conditions and remuneration will have to be improved. Even dreaming of a big kitten, until now imaginary despite the many policies that go in that direction (RGPP, MAP, Public Action 2022, etc.), which would fall from the sky thanks to better public spending efficiency, nothing will not be at the height. all the structural changes that will drive the growth of public spending in the coming decades.

there are alternatives

The structural dynamics of the rich economies are moving in the direction of higher public spending. The Court proposes several ways to recover tax revenue, including tax loopholes that are poorly controlled and whose effectiveness is not well assessed, focusing in particular on the research tax credit (€7.4 billion in 2022) and aid that directly benefit hydrocarbons (cost of 5.2 billion in 2021), these tax expenditures “have an adverse effect on the environment”.

The Court also wants to attack the social niches, all these contribution exemptions that weigh down the Secu’s income, such as exceptional tax-exempt premiums either the abolition of the social package. Results, “By 2022, the gross loss of income linked to these reductions would exceed 83,000 million euros”according to Government estimates, an amount that the Court considers “undervalued”.

Going back to tax and social exemptions and tax cuts, taxing inheritance and capital more, we would get 10 points of GDP in more income

To this must be added a tougher fight against fraud and tax evasion practices. According to the Solidaires-Public Finance union, the loss of income amounts to between 80 and 100 billion a year. The government had asked the Court to verify this amount, but the institution declared itself incompetent. We can’t stop there, your experts will have to agree to investigate the matter.

Let’s dream a little and imagine a world in which Emmanuel Macron does not throw away 80 billion euros of tax collection, a world in which we recover 50 billion in tax fraud and evasion, eliminate 80 billion tax and social niches (we remain with those who are useful). According to the consensus of economists, a true taxation of wealth is established, the taxation of capital is brought back to the level of that of labor (a recent study showed that companies then reduced dividend distributions and increased their investments), without even mentioning an exceptional taxation of super-profits and super-wealth linked to the pandemic and the war. All this would mean the equivalent of more than 10 points of GDP in tax revenue.

Would such a scenario create a fiscal hell that would make liberals howl? No, actually it is simply a necessity to meet the additional spending needs that lie ahead. It is also the only option to avoid future public deficits and a dangerous increase in debt.

Of course, there is an alternative: drastically cut most of our public spending, namely social protection. So the yellow vests will have been just little scuffles. And the National Association will have an absolute majority in the National Assembly. Take your pick.

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