In a column published by Le Figaro, François-Xavier Bellamy and Eric Ciotti have relaunched in a very substantiated manner the debate relating to taxation on inheritances and donations. The two Republican leaders are proposing a radical reduction in the inheritance tax and a direct elimination of gift taxes, which is not surprising as this debate is divided.
The left considers that inheritance is unfair, generates inequalities and that it must be taxed as much as possible. The right believes that it is a “death tax” which affects family transmission: they therefore want it to be extinguished. During the last presidential campaign, Emmanuel Macron mentioned a tax reduction of around 3 to 5 billion euros, completely forgotten since due to the degraded trajectory of our public finances but also a centrist majority by construction divided on the subject.
Heritage developments are not there to calm the debate: in the 1970s, inherited heritage represented 35% of overall heritage. This figure has since risen to nearly 60%, although well below the ratios at the beginning of the 20th century before the introduction of the income tax in 1914. A third of French people have already received an inheritance or donation. during their life and two thirds think they will pass it on one day. Accumulating wealth and passing it on to one’s children is part of the French social dream and this dream, when it comes true, has increasingly tangible consequences, particularly due to the increase in property prices in the long term. .
How to resolve this controversy? To simplify it, we could say that economics is on the left and politics is on the right. Most economic models explain that the social optimum is obtained when inheritance is taxed at 100% and its proceeds are redistributed in education and training. This extreme measure erases an economically inefficient and socially unjust rent. Little sensitive to this theoretical and disembodied argument, nearly 90% of French people are in favor, on the contrary, of a reduction in inheritance taxes. Despite the revolutionary state of mind which still colors our debates, and despite the stubborn denunciation of inequalities and injustices by all, the heritage does not seem collectively considered to be undue. Its connotation in the minds of the French is even positive.
Are the latter therefore suffering from narrow selfishness and, with them, Eric Ciotti and François-Xavier Bellamy? No, because the tax reduction which weighs on transferred assets is based on three solid arguments. The first is that this tax burden is relatively heavy in France and that it penalizes us by comparison effect. Inheritance tax revenues represent 1.4% of total tax revenues in our country, more than double the average for OECD countries. Germany, for example, is at 0.5%. In addition, this heritage is hit after having already suffered an avalanche of taxes and social security contributions “during life”. However, this type of taxation has an impact on the attractiveness of a country. From a utilitarian point of view, its reduction would therefore be a good thing.
A legitimate right, arising from private property
The second argument is that the transfer of businesses is an asset for a country’s economy. In France, this transmission is properly protected thanks to the Dutreil pact which must be protected – approximately 2,000 are made per year. Family businesses have higher profitability than others, less debt and a lower bankruptcy rate.
The third argument is philosophical. From a liberal perspective, parents have rights. That of leaving an inheritance to their children to help them in life is one of them. John Locke, Milton Friedman and Ayn Rand showed that inheritance is a legitimate right arising from private property, work and savings. There is no selfishness or narrow-mindedness in this reasoning, but an economic and philosophical analysis to be discussed.
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