Is the property tax a regressive tax that is disappearing? For Alain Trannoy, the implementation of the reform, postponed to 2028, is far too late.
The council tax has disappeared. When will it be the turn of the property tax? It is to these gloomy or joyful reflections, depending on one’s point of view, that the reading of the recent and instructive note from INSEE[1] which points the finger at the regressivity of the property tax can lead at the beginning of this year.
A regressive tax
Although not entirely new, this finding is supported by the use of an exhaustive administrative database covering the 17 million taxpayers paying this tax. By relating the weight of the tax to the real estate wealth, it is established that the weight of the property tax is divided by three when we go from the first decile of real estate wealth of owners to the10th decile of real estate wealth. Admittedly, this regressivity only concerns “owners”, but it is still a little surprising because the assets taken into account take into account second homes, which are the luxury property par excellence, and the ownership of rental property. Of course, it should be remembered that the first decile of real estate wealth leaves behind another four deciles of renters. However, the fact remains that the observation of this regressivity in the field of taxpayers is problematic for a direct tax, while taxpayers’ sensitivity on this subject is raw, following the large rate increases that have taken place in recent years in many large cities, Paris and Marseille in the lead. In addition, there is a base effect. The bases are revalued every year to keep up with inflation. In total, the bases from 2022 to 2024 will have undergone a revaluation of 15%, leading to a minimum increase in tax in this proportion over the same period for all taxpayers, regardless of their location.
This result of regressivity, beyond angering voters with the property tax, should worry all municipal councillors. The regressivity of the housing tax and the lack of reform of the bases finally got the better of the latter, and at the time of her trial in 2017, she found very few lawyers to defend her. An identical scenario is being set up for property tax. Of course, the need to update the databases has been understood by the legislator, as these, dating from the 1970s, have moved away from the reality of the21st century where land values are concentrated in large cities, and by contagion, in their close peripheries. But the implementation of the reform for taxpayers has been postponed until after the next presidential election, in 2028, which is an eternity in politics.
Sense of tax injustice
To date, there is no guarantee that this update of the databases will be able to correct in a broad way the regressivity noted in the INSEE note[1]. Parliament should take up this issue and demand an impact assessment on that side. Otherwise, the country will be faced with the fact that the only tax that is largely based on rent, the rent linked to the possession of land, and as such fundamentally fair and efficient, will remain degressive. This perception will accentuate the feeling of tax injustice in a country where the middle classes feel that they are heavily taxed. A populist party could seize on this sentiment and propose from the outset that the next presidential election abolish it, as wielding the axe is always easier than reforming.
