Ihe intervention by the Minister of Public Accounts, Gabriel Attal, reaffirming the importance of the fight against tax evasion has sparked many debates. Income tax is at the center of these debates, but also the growing inequalities of wealth. One of the most important and delicate points is precisely the distinction between income and assets. A little historical detour helps to understand it better.
In medieval European societies, the power of the nobility resulted from the possession of a territorial heritage. The nobility lived on the income from its lands, the sale of which was excluded and the acquisition resulted in principle from the granting of fiefs by the princes or from dynastic transmissions. Income and wealth were therefore very clearly separated. Income was the “natural” product of the land (helped by the work of a few serfs…), and the inalienability of heritage clearly distinguished its possession from any other type of property. Income from professional or financial assets had neither the same nature nor the same legitimacy.
It took time for the income from a financial investment in public debt (which appeared in the XIVe century) enjoys the same legitimacy, and the use of the term rent (on the model of income from the land) contributed to this, circumventing the prohibition by the Church of loans at interest. This assimilation suited the States, which could thus borrow relatively cheaply. To this end, they granted their loans the same legal status of “immovable property” previously held only by land and real estate assets. Some private financial assets were gradually added to this public status; some nobles, for example, issued annuities to endow a daughter or buy an office. Thus, the idea of a cut between wealth and income could persist.
sense of justice
When, in the nineteenthe century, joint stock companies spread, one distinguished in their income on the one hand a fixed “interest on capital”, the payment of which was perceived by the shareholders as an obligation independent of the economic situation, on the other the “dividend” strictly speaking, which depended on the situation of the company. Although without serious legal validity, this distinction perpetuated that between patrimony and income.
In a society thus accustomed to the break between an immutable heritage and a variable income, it is not surprising that taxes on heritage (starting with property tax, since the Revolution in France) and on income (to from 1914 in France) were created independently of each other, and without coherence: they were supposed to strike independent entities. From the Great War to the 1960s, the reduction in financial wealth relative to income, due in particular to inflation and nationalizations, dispensed with any reflection on this point. Since the 1970s and especially the 1980s, on the other hand, financial wealth in the form of shares has become more important. To boost their stock prices and minimize taxes (which generally hit dividends more than capital gains), companies have become accustomed to buying back their shares. Today, financial wealth therefore increases even when income does not increase, which creates an increasingly obvious tax distortion.
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