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Impacts of the 2018 Household Capital Tax Reforms on Inequalities in France: A Microsimulation Evaluation

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  • Félix Paquier
  • Michaël Sicsic

Abstract

[eng] This study assesses the impact on standard of living inequality and public finances of the transition from the tax on wealth (ISF) to a tax on real estate assets (IFI), the introduction of a flat rate tax on capital income (PFU), and the increase of the social tax (CSG) on capital income in 2018. We achieve this through the use of the Ines microsimulation model and the ERFS data, which we supplement by imputing the wealth held by each household on the basis of the Household Wealth survey (enquête Patrimoine) and tax data on the ISF and IFI. In the short term, the positive impact of these reforms on standards of living is highly concentrated at the top end of the distribution, although the gains are limited by the increase in the CSG. The cost to public finances is 3.4 billion euros per year. Although they lead to additional public revenues, the short term behavioural effects of the flat tax on the dividends received by households further accentuate the rise in the standard of living of the wealthiest households.

Suggested Citation

  • Félix Paquier & Michaël Sicsic, 2022. "Impacts of the 2018 Household Capital Tax Reforms on Inequalities in France: A Microsimulation Evaluation," Economie et Statistique / Economics and Statistics, Institut National de la Statistique et des Etudes Economiques (INSEE), issue 530-31, pages 27-42.
    • Handle: RePEc:nse:ecosta:ecostat_2022_530_2
    DOI: https://doi.org/10.24187/ecostat.2022.530.2066
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    JEL classification:

    • D31 - Microeconomics - - Distribution - - - Personal Income and Wealth Distribution
    • D63 - Microeconomics - - Welfare Economics - - - Equity, Justice, Inequality, and Other Normative Criteria and Measurement
    • H20 - Public Economics - - Taxation, Subsidies, and Revenue - - - General
    • H23 - Public Economics - - Taxation, Subsidies, and Revenue - - - Externalities; Redistributive Effects; Environmental Taxes and Subsidies
    • H31 - Public Economics - - Fiscal Policies and Behavior of Economic Agents - - - Household

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