Grandstand. At the start of Emmanuel Macron’s five-year term, the debate on inequalities had focused on tax justice, following the reforms of the wealth tax and the taxation of financial income, which both reduced it. Five years later, the debate on inequalities has shifted to the taxation of inheritance.
This shift in the debate towards inheritance is not taking place only in France, since, in a 2018 report, the Organization for Economic Co-operation and Development (OECD) already invited member countries to modify their inheritance rights, considering that this was one of the means of combating social inequalities.
In France, several reports have been published, including that of France Strategy in 2017 (“ How to reform inheritance tax? “) and most recently (December 2021) that of the Economic Analysis Council (” Rethinking inheritance “). In 2020, a bill from the socialist group (rejected in the finance committee) brought about a reform of inheritance rights.
All start from the observation that inequalities in wealth have increased over the past thirty years and that the heritage held has become at the same time much more inherited than acquired (in France as in other Western countries). This contributes to the maintenance, or even the increase, of inequalities between generations (a heritage that can pay off).
Fewer negative effects
One way to reduce inequalities would be to correct the “initial endowments” of individuals. The justification given for taxing wealth at the time of transmission rather than taxing its holding (ISF-type capital tax) or its income (tax on capital income) is that this would create fewer negative economic effects.
In particular, the risk of tax avoidance would be lower in the case of inheritance and the disincentive to saving would be lower. This implies believing in the (significant) dissuasive effects of taxes on capital in general, which does not seem to be settled by empirical studies. If the way to articulate the different ways of taxing capital is not very clear, the reform proposals are.
The proposals of the various reports are found on the main lines. The main idea is to reduce the difference between donations during life and inheritance at the time of death, by strengthening the possibilities of donation throughout life. This is to allow descendants to inherit at a younger age, with the aging of the population also leading to an increase in the age of inheritance.
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