As the public deficit is set to spiral out of control in 2024, the Prime Minister could increase taxes on the wealthiest taxpayers. One option would be to freeze the income tax scale for the highest-taxed households. Here is the quantified impact of such a measure.
© Illustration Capital / Freepik
– A freeze on the tax scale, even partial, would not be painless for many taxpayers.
Despite repeated promises not to increase taxes for the French, the wealthiest among them should ultimately not be able to avoid it in 2025. The government is in fact considering freezing the income tax scale for 2025. A path that would hold the rope to straighten out the public accounts, according to The Sunday Tribune And The Echoesand which was mentioned in broad outline on Sunday, September 22, by Michel Barnier on France 2. “I’m not going not to further increase taxes on all French people»promised the new Prime Minister, specifying “think about this solidarity effort in which the richest must take their part”The tenant of Matignon having excluded from this reflection “the poorest people, working people, the middle classes”everything suggests that the tax increase will fall on the wealthiest tax households. And would involve a freeze on the income tax scale for taxpayers in the highest marginal tax brackets (MTB), namely at least the MTBs of 41% and 45% and potentially the 30% MTB.
But what is it all about? To understand it, let us recall that each year, the examination of the draft finance bill – the Budget – acts on the revaluation of the income tax scale to the level of inflation. And this, in order not to increase the taxation weighing on workers when the latter have not benefited from a salary increase greater than the increase in prices. A protection which targets in particular people paid at minimum wagethe minimum wage being revalued every year in line with inflation. Each year, the thresholds for entry into the different brackets of the tax scale (0%, 11%, 30%, 41% and 45%) are therefore raised according to the expected increase in inflation. A notable exception, however, with the freezes voted for the 2012 and 2013 financial years: the brackets had not been revalued at that time, with the consequence that 940,000 new taxpayers entered the tax scale in 2012 and a tax increase of 80 euros per tax household.
Possible scales in 2025
But what would happen if a freeze on the scale were indeed implemented for the higher brackets? And above all, what would be the cost of such a measure for the taxpayers concerned? To find out, we need to get out the calculator and make certain assumptions. First of all, that of inflation at 2% for the year 2024, a percentage which, in the absence of a freeze, would be applied to all brackets. Thus, starting from 2024 scalethe one in force in 2025 would be as follows:
- 0% tax up to 11,520 euros
- 11% tax from 11,520 to 29,373 euros
- 30% tax from 29,373 to 83,988 euros
- 41% tax from 83,988 to 180,648 euros
- 45% above 180,648 euros
On the other hand, if a freeze is applied to the higher brackets (30%, 41% and 45%), it is this scale which will prevail in 2025:
- 0% tax up to 11,520 euros
- 11% tax from 11,520 to 28,797 euros
- 30% tax from 28,797 to 82,341 euros
- 41% tax from 82,341 to 177,106
- 45% above 177,106 euros
Flat tax: how much would a reform of this tax bring to the State?
109 euros extra tax for a single person earning 40,000 euros
Let’s then take the example of a single person who earned 40,000 euros in 2023. With the scale in effect this year, the amount of his tax from his income tax return filed last spring reaches 4,086 euros. If his salary does not increase in 2024 and each of the scale slices is revalued by 2%, he will only have to pay 3,952 euros, or 134 euros less. On the other hand, if the threshold for entering the 30% bracket is frozen, he will have to pay 4,061 euros in tax. That is 109 euros more than with a fully revalued scale.
If his income increases at the level of inflation in 2024, i.e. by about 2%, then our single person will have received 40,800 euros in 2024. With a scale revalued at the level of inflation, he would pay 4,168 euros in tax on this income. But if the scale is revalued only for the 0 and 11% brackets, he would have to pay a tax bill of 4,277 euros, or again 109 euros more.
Income tax: is the freezing of the scale a “disguised increase”, as Macron’s party claims?
219 euros extra tax for a married couple earning 100,000 euros
Let’s then take the example of a married couple where each member earns 50,000 euros in 2023. This year, their tax amount reaches 13,572 euros. With a 2025 scale fully revalued by 2%, they would pay “only” 13,304 euros. But if a freeze on the higher brackets is enacted, they will have to pay 13,523 euros, or 219 euros more.
If our couple’s income increases this year by 2%, or at the level of anticipated inflation for 2024, then he will declare 102,000 euros of income next year. With the scale frozen, he will have to pay 14,063 euros in tax, compared to 13,844 euros if it were fully increased by 2%. That is 219 euros more. With a higher salary increase in 2024, for example 4%, his income declared in 2025 will be 104,000 euros. With a scale increased by 2%, his tax would be limited to 14,384 euros. But with a freeze on the high brackets, it will also increase by 219 euros, to 14,602 euros.
Tax Hikes: Are You Part of the ‘Middle Class’ Who Might Be Spared?
Almost 300 euros more tax for a single person earning 150,000 euros
Finally, a single person who earned 150,000 euros in income in 2023, which places him in the TMI at 41%, currently pays income tax of 39,919 euros. With a scale raised by 2%, this same 150,000 euros of income would give rise to a tax reduction of 39,263 euros. But with a freeze on the high brackets, it will reach 39,554 euros, or 291 euros more.
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