Gabriel Zucman
@gabriel_zucman · Europe
Gabriel Zucman is followed by Storyz World for research and subject expertise coverage connected to France in the Europe chapter.
Mr. @PatrickMartin_1, wanting to put an end to the tax privilege of billionaires is in no way a “hold-up.” On the other hand, weakening our already exhausted public finances, importing the American model of private insurance into France, and redistributing income to the detriment of the most disadvantaged—that is the real “intellectual and political hold-up.”
Translated from FrenchSo this is what the so-called “social” VAT is: redistributing income in favor of senior executives and shareholders, at the expense of the poorest and the economically inactive. A thoroughly unequal policy, camouflaged, as so often, behind misleading rhetoric and a pernicious implementation. For this policy precisely amounts to lowering social benefits (retirement pensions, unemployment insurance, RSA, etc.) without saying so, while redistributing the savings thus achieved to the most advantaged households, without saying so.
Translated from French- For working- and middle-class people in employment, the net effect is neutral or small: the increase in VAT wipes out the increase in take-home pay. What was given on payslips is taken back at the supermarket checkout. - For high-paid workers and shareholders, who consume only part of their income, the effect is positive: the increase in take-home pay and profits exceeds the increase in VAT. - Finally, for people who are not employed—retirees, unemployed people, RSA benefit recipients, etc.—the effect is very negative: they bear the full brunt of the VAT increase, without any compensation.
Translated from FrenchHere is what can be said about it, in light of the best available studies. - A reduction in employee contributions would increase the net wages of the workers concerned. - A reduction in employer contributions would translate partly into increases in net wages and partly into increases in companies’ profits. - An increase in VAT would raise the price of consumer goods. What is the net effect of all this?
Translated from French3/Finally, the shortfall could be offset, as @medef proposes, by an increase in VAT: this is the famous “social VAT” project. It is worth dwelling on, because this proposal risks being at the heart of the debates surrounding the upcoming presidential election. Fewer social contributions on one side, more VAT on the other: who would win and lose in this shell game?
Translated from FrenchIn this scenario, instead of devoting part of their wages to funding Social Security, workers would pay a contribution to private insurance companies: supplementary health insurance, retirement savings, etc. This is the American model that I know well, having lived in the United States for 10 years and produced various studies on these subjects. And the least one can say is that this model is not convincing, especially in healthcare: prohibitive costs, inequitable financing, major inequalities. 28 million Americans do not have access to health insurance.
Translated from French2/Secondly, these cuts to social security contributions could force Social Security to reduce the scope of its intervention: higher medical deductibles, the removal of reimbursement for medicines, a higher “co-payment” at hospitals, lower retirement pensions, etc. The result would be a deterioration in the protection of the French, or (and the two are not mutually exclusive) an expansion of the scope of private insurance.
Translated from FrenchWhat should we expect from such a policy? There are three possibilities. 1/Either these additional reductions in contributions are unfunded. They would then widen our public deficits even further, already very high because of the decline in public revenues since 2017. The deficit will indeed once again exceed 5% of GDP in 2026, something that has never been seen in the entire history of our country outside a period of war, a severe economic crisis or a pandemic.
Translated from FrenchYet @medef proposes putting another coin in the machine. The 90 billion in contribution cuts are not enough: 60 billion more must be added. Net pay must also be brought closer to gross pay, according to the Medef and some presidential candidates such as @GabrielAttal and @EPhilippe_LH who support it.
Translated from FrenchThese reductions in social contributions have reached such levels that they now find scarcely any support among economists, even the most favorably disposed. Antoine Bozio and Etienne Wasmer – two economists who cannot be accused of leftism – concluded in a report commissioned by the government in 2023 that these exemptions had gone much too far.
Translated from French (France)To win this victory, @Medef mobilized particularly misleading but effective rhetoric: By renaming social contributions “charges,” presenting these deductions that nevertheless fund vital needs — such as getting medical care or raising children — as a “burden,” and making people believe that the employer “bears” these contributions, when they are actually wages set aside and socialized by workers to protect themselves from life’s uncertainties. It is telling.
Translated from FrenchSince the 1990s, @medef has fought to reduce these social contributions. With immense success: exemptions from social contributions now amount to €90 billion (!) per year, or 3% of GDP. These contribution cuts have created a considerable hole in our public finances. They have also forced our Social Security system to reduce its scope, leaving the field open to private insurers – I will return to this.
Translated from FrenchAnd this is only the tip of the iceberg. For alongside this development, another, with even more far-reaching consequences, has unfolded over the past three decades: the undermining of our social protection system born out of the Second World War. To understand it, we need to go back to what a payslip is, because this is where the broader project championed by @medef for years is revealed.
Translated from FrenchAccording to Insee, the effective tax rate of large companies fell from 19.3% in 2016 to 14.3% in 2022: The shortfall for public finances is considerable: around 20 billion euros per year. That is equivalent to the higher-education budget that vanished in less than a decade.
Translated from French (France)The consequence of all this? The effective corporate tax rate has certainly not fallen by half since the 1980s (because tax loopholes were already eating away at corporate income tax in those years), but it has fallen sharply. And it is the large companies that have fully benefited from this collapse. Not SMEs, which can hardly send their profits to Singapore or the Bahamas.
Translated from FrenchAt the same time, large multinational companies have started shifting an increasing share of their profits to tax havens, siphoning off France’s tax revenues. A textbook case: @TotalEnergies, despite employing 37,000 people in France, records no profit there and therefore pays no corporate tax there.
Translated from FrenchThe corporate tax rate, which is the main tax paid by companies in France, fell from 50% in 1985 to 25% in 2026. It was cut in half in one generation.
Translated from FrenchHello @PatrickMartin_1, you are turning reality on its head. For forty years, it is @medef that has carried out a real “intellectual and political hold-up.” At the expense of public finances, our social protection system, and the most disadvantaged. Judge for yourself.
Translated from FrenchIncome inequality has increased more than commonly thought in Sweden. Billionaire wealth has increased almost as fast as in the US. One shouldn't wait for inequality to reach US levels before discussing what to do about this trend. https://t.co/siFZGJJcxD