The economist, coordinator of Emmanuel Macron’s economic program, believes that the United States is living the end of a cycle opened by Ronald Reagan on tax cuts, and considers that the tax proposed by Elisabeth Warren or Bernie Sanders poses a legitimate debate given the rise in inequalities. However, he does not regret the abolition of the French ISF, considered harmful by its terms.

Economist Jean Pisani-Ferry.

The question of the introduction of a wealth tax is making a comeback in the economic debate with the American Democratic primary. Why is this tax becoming topical again today?

We are witnessing the end of the open cycle with the election of Ronald Reagan in 1980. Since then, it has only been a question of tax cuts and a reduction in the role of the state during American election campaigns. But this time, among the Democrats at least, the subject of income inequalities and especially wealth has emerged. We have indeed reached a corrosive level of wealth inequalities in the United States: the share of the top 0.1% in total wealth has tripled since 1980, going from 7-8% to over 20%. At the same time, the wealth of the poorest 40% of the population has declined. So it has become an absolutely major subject.

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The wealth tax, the debate that is mounting in the United States

Why rely on taxation rather than competition policy to counter this phenomenon?

Thomas Philippon clearly demonstrated the impact of the weakening of competition in the United States. When we see cases like that of Jeff Bezos, the founder of Amazon, one wonders if a more effective competition policy tracking down monopolies would not be relevant to deal with these inequalities problems. We must not try to do everything through taxation. However, it retains its role, but by adapting it to the new methods of capital accumulation. Look at the list of the richest Americans: their wealth often comes from capital gains, that is, the capital gain accumulated year after year, not from savings and income. In this situation, income tax is ineffective – because the income of these wealthy Americans is only a tiny fraction of what they earn in capital. Capital gains are often latent rather than realized, and inheritance tax cannot be expected to respond to the accumulation of immense fortunes by people between the ages of 30 and 50. Hence the proposal by Emmanuel Saez and Gabriel Zucman to create a tax on large fortunes. It was taken over by Elizabeth Warren.

Do you think a tax on large fortunes is once again becoming a relevant instrument of economic policy?

For an economist, it is not a first-rate instrument. The proposal for the taxation of fortune has given rise to a very lively and, moreover, very instructive debate on the other side of the Atlantic on the purposes and effects of such a measure. But in the real world, if one considers that a certain level of accumulation of inequalities is corrosive to society, it is an instrument that must be considered.

What is the correct rate for such a tax?

Elisabeth Warren had initially proposed to tax at 2% above $ 50 million of wealth and at 3% above a threshold of $ 1 billion, then it rose to 3% and 6%, which in fact confiscatory rates. In any case, it is unlikely that this tax will be imposed in the short term even if Elisabeth Warren was elected: the taxation of fortunes is not a federal competence. On the other hand, the question of the taxation of the richest will not disappear soon from the debate in the United States. It may emerge in the form of capital gains tax reform.

Does your call to reconsider the taxation of large fortunes also apply to Europe?

It is clear that the figures for the accumulation of wealth are very different in Europe. When we talk about inequalities in the distribution of income, we are talking first of the United States, then of a certain number of emerging countries such as China, and then of the United Kingdom, Germany and significantly less France. This does not prevent having this debate in Europe as well, even if tax competition between States poses problems that do not exist in the United States. The condition is to pose the debate in terms very different from those of the former French ISF.

So you are not advocating a rehabilitation of the former ISF?

What Emmanuel Saez and Gabriel Zucman defend is to tax all wealth but from a high threshold, in order to have a tax base as broad as possible. This is the complete opposite of what existed in France with the ISF, whose threshold was low and which for this very reason suffered from a massive problem of sprawl of the base, which meant that the effective rate for the 0 , 1% of the richest people was extremely low. The redistributive profile of this tax was not adequate, and it penalized the mobility of capital since the work tool was exempt while the output was taxed. I have not the slightest regret with regard to the ISF.

By removing the ISF, isn’t France finding itself against the grain despite everything?

In these matters, France is rarely ahead. But the real question is whether the current combination chosen for household taxation – namely income tax, tax on real estate only and the “flat tax” on capital income – is powerful enough to contain rising inequalities. Do we need a new tool? In France, since innovation is weaker than in the United States, the dynamics of capital accumulation are weaker. But even in France, the possibility of resorting to new fiscal instruments should not be ruled out. An evaluation has been launched. Let’s wait for his results to know the effects of the withdrawal of the ISF. The debate will certainly return in a few years, no doubt on the occasion of the presidential election.