If the progressive tax is fairer, there is nothing to determine at what level we should set the different rates and therefore the scale of progressivity. Is the current higher rate of 45% fair or not? Should we, for example, consider that no one can earn more than a certain amount with a very high rate? In the United States, from the post-war years to the 1960s, this rate reached 90%. In France, it exceeded 70%. Basically, everything depends on how we determine to what extent, depending on the rise in income, money is more or less useful or superfluous to the recipient.
Is VAT fair?
VAT is often considered unfair because the tax paid is inversely proportional to income. It is indeed a tax on consumption: we pay it, without realizing it, every time we go to the cash register, when we do our shopping. The amount is written on your ticket. The company that sells you something then transfers the amount of VAT collected to the State. The richer you are, the more you save, and the less you consume in proportion to your income (everything is relative). In relation to income, the share of VAT paid on consumption decreases when the standard of living rises. The lower rates for basic goods do not change much. For filing business taxes this is essential.
- Defenders of VAT emphasize that the important thing is to tax what fills a need. At first glance, saving doesn’t make up for anything. Any amount saved will be taxed one day in the form of consumption: either at the time of inheritance, or during the purchase of a good or a service. This is not wrong, and often the VAT is criticized in a simplistic way. Still, this tax has two drawbacks. On the one hand, it is not progressive: it does not change the relative inequalities. On the other hand, in an uncertain world, savings actually meet a need for security for those who have the means: to protect themselves for the future. She has some kind of utility too. Taxing income rather than consumption also makes it possible to tax savings and prevent rents from building up.
Housing tax, proportional to income
Housing tax is the tax paid each year by the people who live in a dwelling, whether they are owners or tenants. It is calculated according to the rental value of the accommodation, from bases which have not been updated since the 1970s. There are reductions for the most modest, which means that four million households are exempt or see their reduced tax.
The housing tax is, overall, a tax proportional to income since the value of housing depends on the standard of living of taxpayers. In total, the poorest 90% pay an average of 530 euros in housing tax against 1270 euros for the next 9% and 1900 euros for the richest 1%, according to INSEE. Its amount varies a lot according to the municipalities: those which, like Paris, have a lot of resources coming from the establishment of companies can charge low rates, unlike the municipalities which have few economic activities. The taxpayers of these “resource-poor” municipalities will benefit.
Definitions: taxes, duties, compulsory levies
Taxes are levies on the resources of taxpayers, with no fixed compensation, to cover the public expenditure of the State, local communities and the European Union. Taxes are special forms of taxes, most often associated with the purchase of a good. Social contributions are deductions from wages for a specific purpose, the financing of social protection. Strictly speaking, these are not “taxes”. Compulsory deductions include all taxes and social contributions. The audiovisual license and the household waste collection tax are not officially considered as “compulsory levies” because they directly finance a service.