It is an emblematic decision: the abolition of the housing tax. But was it a good idea? As the five-year term of the Head of State comes to an end, here is the first article in our new series on the results of Emmanuel Macron’s reforms for the household wallet.
The most essential measure for purchasing power. This is what candidate Emmanuel Macron announced in 2017 when he unveiled his promise to abolish the housing tax for 80% of households. Five years later, has this commitment really been kept and what are its effects?
What is this reform?
The housing tax, paid by owners and tenants alike, has been criticized for a long time for its calculation model, which is deemed to be unequal, based in particular on very old criteria. The implementation of this abolition raised, from the summer of 2017, questions about its date of entry into force but also about its scope: should this abolition concern all residences or only the main dwelling?
That’s not all. The Constitutional Council had also made reservations, on behalf of the equality of all before the tax, on a measure that is supposed to benefit only part of the households. As a result, the promise of suppression was finally limited to the main residence, but also extended to all individuals. If this tax is not good for 80% of households, there is little chance that it will be good for the remaining 20%, said Emmanuel Macron at the end of 2017.
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What savings for households?
The housing tax was first removed for 80% of the poorest households in three stages. Its amount has been reduced by a third each year between 2018 and 2020. According to tax calculations, the end of the residence tax represents an average saving of 600 euros per year for these 22.8 million households.
Number of household tax shares | Maximum RFR for full exemption | Maximum RFR for a digressive partial exemption |
|---|---|---|
1 share | 27761 | 28789 |
1.5 slices | 35986 | 37528 |
2 slices | 44211 | 46267 |
2.5 slices | 50380 | 52436 |
3 slices | 56549 | 58605 |
More than 3 parts | 56549 + 6169 per additional half share | 58605 + 6169 per additional half share |
From 2021, the wealthiest 20% of taxpayers, i.e. 7.2 million households, have also started to benefit from this reform, with an initial rebate of 30% for a average gain of 363 euros. This exemption will be pushed to 65% in 2022 before full exemption in 2023. In total, the Minister of Finance estimates that the total gain over the five-year period is close to 40 billion euros for 30 million households.
It should also be noted that the abolition of the housing tax has de facto deprived the municipalities of one of their main sources of resources. Consequently, Emmanuel Macron had undertaken to compensate it to the nearest euro, on the basis of 2017 receipts. From now on, the municipalities keep the receipts from the housing tax only on the 3.5 million second homes and vacant dwellings .
Secondary residence: what the housing tax costs
According to a report by the General Directorate of Public Finances (DGFiP) published in October 2021, the average amount of housing tax in 2020 was 756 euros for a second home and 915 euros for an apartment. Secondary apartments are more often found in highly touristic or dense locations, where the residence tax is often higher, while secondary houses are found in more rural areas, with a lower residence tax, explains the DGFiP.
Is the balance positive or negative?
For the wallet of the French, the end of the housing tax program is, at first sight, very good news. This tax was based on questionable tax bases. Its abolition has solved the problem and it is the main measure of support for purchasing power during this five-year period, notes Pierre Madec. Questioned by MoneyVox, this economist at the OFCE brings a downside: This tax, while poorly calibrated, meant that the wealthiest paid the most. Its removal for all therefore entails a negative redistributive effect. It has rather favored the middle classes, for which its amount was the highest as a percentage of income, complete Franois Ecalle, president of Fipeco, an information site on public finances.
This former magistrate of the Court of Auditors saw in the housing tax at least one advantage. It was paid by almost all the inhabitants of each commune and enabled them to raise awareness of the cost of local public services, which could limit requests for extension and improvement of these services and therefore the increase in public expenditure.
Deprived of the lever of the housing tax, some mayors could be tempted to catch up on the property tax. According to the latest figures from the National Union of Property Owners, the property tax increased by 28% between 2010 and 2020. And we think that the increase will continue, with the abolition of the housing tax, explains its president Christophe Demerson, who believes that local elected officials already anticipate where they will seek revenue. If the land tax increases, by snowball effect, one can imagine that there are inflationary effects on rents, adds Pierre Madec.
Furthermore, Franois Ecalle observes that the compensation mechanism set up for local authorities by the State goes through complicated circuits. The municipalities now receive the departmental share of the property tax on built properties and a fraction of the VAT is allocated by the State to the intermunicipalities and the departments. But in the end, it is the State coffers that take charge of this abolition of the housing tax, up to 18 billion euros per year.
This contributes to increasing the deficits and the debt of which it will be necessary to regain control, points out Franois Ecalle. However, it is difficult to imagine a restoration of the housing tax. The measure is not on the program of any of the candidates currently declared for the presidential election of 2022.
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