Income taxes: who will benefit most from the cut?

Executive “Act II” starts with a big number: 5 billion euros. This is the amount of the future massive cut in income taxes. This boost was announced Wednesday, June 12 by Edouard Philippe, during his general policy speech to the National Assembly. As promised, the active middle classes are the big winners of the measure.

The Prime Minister thus announced an average gain of 350 euros for the 12 million households not exceeding the first tax bracket. And, for the 5 million households of the following tranche, it will reach 180 euros. The executive insists: there will be no losers from this reform. But the wealthiest households will gain almost nothing. When we look in detail at the concrete cases provided by Bercy, we realize that it is, in fact, the upper middle classes who are the most advantaged.

33% less tax for some singles

Imagine a single person without children. If he earns 1,500 euros monthly, his IR will drop by 39 euros. That is 14.7% savings compared to its old tax. If he touches 2,000 euros, however, it’s the jackpot. His annual gain will reach 541 euros (-33.2% of his IR). And finally, at 3,000 euros per month, its economy will be relatively much smaller. Only 125 euros, a decrease of 3.2% of its IR.

Same story for the couple with two children. For 4,000 euros of declared income per month, the IR will drop by 181 euros (-17.5%).

For 4,600 euros of income, the gain will be 885 euros (-31.9%). And for households earning 6,500 euros, the gain will be 250 euros (-3.9%). It is only in the case of single parents with one child that the lower middle classes are favored.

To achieve these targeted tax cuts, the government used several levers. First of all, he reduced the tax rate for the first tranche of IR. Today, a taxpayer does not pay tax up to 9,964 euros in annual income, and then has a rate of 14% applied to his income bracket up to 27,519 euros. From now on, this rate will only be 11%.

Source: Ministry of the Economy

A slightly simplified gas plant

To prevent this measure from also benefiting better-off households, the trigger thresholds for the upper brackets have been lowered: the threshold for the 30% bracket will drop from 27,521 euros to 25,406 euros, still allowing these households to do so. some tax savings. On the other hand, for households taxed in the upper brackets (41% and 45%), the operation is completely neutral.

To favor middle-class households, the brains of Bercy have also chosen to strengthen the discount mechanism, invented in 1981. This tax reduction, little known and subject to a complicated calculation, makes it possible, in fact, to postpone the triggering threshold of the first tranche and to reduce its rate only for households earning less than 27,519 euros, and therefore now less than 25,406 euros.

As the imagination of our rulers is limitless, a second mechanism was added under Manuel Valls: an additional reduction of 20% on the tax due after discount, for households earning up to 18,985 euros then the application of a decreasing rate from 20 to 0% between 18,985 euros and 21,037 euros. Hard to get more complicated! According to our information, the government has decided to abolish this “Valls tax reduction” in order to retain only one reinforced discount mechanism. The measure therefore has the merit of slightly simplifying the IR scale without however completely overhauling our fiscal gas plant.

According to the simulations of Bercy, a bachelor without children