Housing tax: “Just because it has been abolished does not mean that it is no longer paid”

Philippe Crevel is an economist. He heads the Cercle de l’Epargne as well as the economic strategy research and consulting company Lorello Ecodata.

Planet: In 2017, candidate Macron pledged to remove council tax for 80% of taxpayers. Once elected president, he changed his mind at the margin and decided to abolish it for all French men and women, which he began to do gradually from 2018. However, the disappearance of A tax does not constitute a neutral act, on the fiscal level. For whose benefit and to whose detriment is this suppression being carried out?

Philippe Crevel: The housing tax, until its gradual abolition, was paid by all the occupants of a dwelling. Then, in 2018, Emmanuel Macron began its abolition, which initially resulted in an exemption for low-income households. Subsequently, as the process unfolded, it was the middle classes who were entitled to it and therefore, de facto, benefited from the system. From 2023, all taxpayers should normally be entitled to it.

In fact, it is true to say that not all taxpayers benefit as much. The amount of housing tax does not depend on income and therefore the tax is not proportional. It is often higher in large cities, although this is not systematic. The size of the dwelling and the cadastral value obviously play a role. Consequently, it must be recognized that this abolition benefits more urban dwellers and wealthy populations rather than the most fragile households.

Moreover, the abolition of the housing tax is obviously to the detriment of the local authorities and municipalities that were beneficiaries. They have since received compensation, estimated on the basis of objective criteria (such as the number of inhabitants) and the amount of which was calculated between 2018 and 2019. That being said, they mechanically barter their financial autonomy for a staffing system , which will mechanically imply a potential shortfall in the future.

Fundamentally speaking, communities have lost more than money: they have lost a fiscal instrument.

Planet: Local authorities, which were the main beneficiaries of the housing tax, are therefore losing a source of funding. Years after the start of the procedure, have we seen a report on the property tax? Does this mean that it is up to the owners alone to support the housing tax?

Philippe Crevel: The temptation is very strong, on the side of local authorities and municipalities formerly beneficiaries of the housing tax, to have this abolition weigh on the property tax and the other taxes that they can modulate. These are, in fact, the fiscal instruments they have left.

The property tax, which rests on the owners, theoretically weighs on 57% of French women and men. Statistically, they make up a rather well-to-do category of the population, or belonging to the upper middle class. These are the people who fear the increase in the property tax, even though the latter will probably be integrated into the rent. Of course, the deferral of the housing tax on the property tax weighs above all on the owners, but all those who can rent their property also weigh on their tenants.

Planet: Can we really speak of a tax cut attributable to Emmanuel Macron in this case?

Philippe Crevel: That is the whole question. Keep in mind that this is a sleight of hand game. The housing tax has been abolished, but that does not mean that it no longer exists. The housing tax remains… it is simply paid by the State. Concretely, this therefore means that the administration has transferred a local charge to the national taxpayer. There hasn’t really been a tax cut… He’s just paid differently.

The residence tax, let us remember, is a very unpopular, archaic tax. Politicians have been trying to reform it for years. This was already to be done in 1992 when it was a question of making it a bis income tax, but faced with the challenge the executive ended up backing down. The abolition of this tax is the end of a cycle, and of a fairly unfair tax.