French President Emmanuel Macron announced tax cuts of up to €2 billion on Monday evening, specifically targeting the middle class in France. The move comes in

response to the challenges faced by the middle class, including high inflation and stagnant salaries in recent months.

During a televised interview with French national broadcaster TF1, President Macron revealed his government's plan to propose tax cuts that would enhance the purchasing power of the French people. The primary focus of the cuts is to benefit hardworking French individuals and families who struggle to make ends meet due to rising living costs. Macron expressed his goal of increasing the disposable income of the French middle class.

However, the new fiscal policy does not directly translate into a reduction in income tax. Macron explained that the government is exploring various methods to alleviate the financial burden on households, mentioning the possibility of reducing employees' social security contributions.

While the president did not provide a specific timeline for the implementation of the tax cuts, he stated that they would be in place by the end of his mandate in 2027.

Defining the French Middle Class

Although Macron's description of the French middle class during his recent announcement was somewhat vague, he offered a clearer definition in an exclusive interview with French daily L'Opinion. According to the president, the middle class comprises individuals earning between €1,500 and €2,500 per month, which corresponds to 1.08 to 1.81 times the minimum wage (€1,383 per month). This segment represents slightly over 50 percent of the population, based on statistics from France's National Institute of Statistics and Economic Studies.

However, economists and statisticians do not universally agree with Macron's definition. The French Observatory of Inequalities defines the middle class as the 50 percent of the population situated between the poorest 30 percent and the richest 20 percent. The Organization for Economic Co-operation and Development (OECD) provides a broader definition, considering up to 68 percent of the French population as middle class, with incomes ranging from 75 percent to 200 percent of the median. French economists Thomas Piketty and Lucas Chancel define the middle class as only 40 percent of the population, positioned between the richest 10 percent and the poorest 50 percent.

Regaining Public Support?

Macron appears to be making efforts to regain public support following the intense backlash he faced after his government pushed the highly unpopular pension reform bill through parliament without a vote two months ago. In addition to announcing the planned tax cuts, Macron highlighted various fiscal measures aimed at improving the purchasing power of the French people, which have been implemented by his government.

During Macron's first five-year mandate, France's Ministry of Economics and Finance unveiled tax reductions totaling €52 billion. The president emphasized that these tax cuts were primarily focused on the middle class, citing examples such as decreased employee social security contributions, the elimination of the housing tax, and a €4 billion income tax cut introduced after the yellow vest movement. The government also abolished the TV license fee for French households last year.

Notably, Macron did not mention the wealth tax that was abolished in late 2018 and replaced by a flat 30 percent tax on wealth and a tax on real estate. The cost to the treasury is estimated to be between €3.2 billion and €5.1 billion per year. Although the effectiveness of this tax abolition in stimulating the French economy, as promised by the government, remains to be proven, a report published by policy discussion body France Stratégie in 2020 indicated that the country's richest 0.1 percent have become even wealthier as a result. Photo by Jacques Paquier, Wikimedia commons.