Can we still tax large companies and wealthy households even more? In France, this idea has become a false solution. It would only worsen an already worrying imbalance between one of the world’s highest levels of redistribution and a weakened capacity to create wealth.
France ranks among the five most redistributive countries in the OECD: the gap between the Gini indices before and after transfers is among the largest. More than half of households pay no income tax, while the top 10% account for nearly 75% of total payments. The tax wedge on lower brackets is below that of most European countries, but for upper brackets, it is the highest.
Increasing an already record-high tax burden would mean ignoring its negative effects on both growth and public finances. The supply-side policies of recent years — including the 30% flat tax, the partial alignment of corporate tax rates with our neighbors, and the general stabilization of levies — have helped raise the employment rate (still too low though) and reduce unemployment, while initiating reindustrialization. Any further rise in the tax burden would once again widen the competitiveness gap, discouraging investment.
The deterioration of public finances is not the result of these policies, but stems from the uncontrolled growth of the public wage bill, the cost of emergency Covid measures (useful but poorly calibrated in scope and duration), the abolition of the housing tax, and demographic aging without a completed pension reform.
The logic of “taxing more to share more” has become not only unjustified but also counterproductive. Beyond a threshold that has already been reached, it discourages talent, innovators, and investors. Another increase would accelerate the exodus of affluent households convinced that the process has no end. Young graduates are following suit: today, 23% more of them than ten years ago settle abroad immediately after graduation, and more than half plan to leave within three years, citing a sense of decline and insufficient economic recognition.
When the desire to redistribute outweighs the incentive to create new income, the pie itself shrinks. We are already there. The issue is not “tax justice,” which is largely achieved (though efforts against excessive optimization remain necessary), but collective efficiency. Raising taxes further would neither reduce debt nor the deficit as long as public spending remains unchecked. The French vicious circle would close in on itself: record-high taxes and spending, debt growing much faster than our neighbors’, and deteriorating growth as well as public services.
It is therefore on structural reforms that action must focus: integrating low-skilled youth into the labor market more quickly, promoting technical career paths, encouraging longer working lives when health allows, easing over-regulation that stifles growth and innovation, and strongly raising the level and performance of the education system, now lagging behind the best.
These reforms — successfully implemented by many of our neighbors, including social-democratic ones — belong to no political camp. Only these measures would allow France to regain stronger growth and sustainable public finances, an essential condition for preserving both solidarity and prosperity.
Olivier Klein
Professor of Economics, HEC