Should we create a green wealth tax?



► “It would be counter-productive and ineffective”

Eric Pichet, professor of economics at Kedge Business School (1)

Wanting to recreate a wealth tax to limit inequalities, while fighting against global warming, is an absurd idea. This would lead to remaking an ISF even higher than what existed before, which goes against 20 years of studies and debate which have shown that the ISF yielded less than it cost. The 5 billion euros in revenue actually led to a double tax loss by pushing taxpayers into exile.

While Emmanuel Macron had the courage to stop this hemorrhage by transforming the ISF into an additional tax on real estate, we must not go back. Putting back an ISF, even repainted in green, would only revive expatriation because France is already a country that heavily taxes capital.

→ ANALYSIS. ISF, PFU: dividends soar, the impact on employment uncertain

Those who think that it is necessary to make the holders of heritage pay more seem to forget that France is, by far, the country where this is already done the most. We have six different taxes on capital, from registration fees to the IFI (tax on real estate wealth) through transfer or gift taxes. This is a unique situation and further widening the gap with neighboring countries would harm our competitiveness, and therefore investment.

The other big problem with this proposal is that it mixes ethics and economics. It wants to seek to reduce greenhouse gas emissions but has the wrong target and therefore does not resolve anything. First, a large wealth is not necessarily synonymous with high income and, second, it does not necessarily imply a high consumption of CO2.

This green ISF would therefore be economically counter-productive and ecologically inoperative. In addition, one can imagine the complexity that would have to be developed to vary this new ISF according to the asset portfolio of each taxpayer. This would undoubtedly pose problems of control but also of constitutionality, because the ISF would exceed the incomes of many taxpayers.

Behind this idea, I see above all a new attempt to reopen the debate on the part of those who have never accepted the abolition of the ISF and see in ecology the means of resuming the charge. Of course, the crisis has revived the need for the state to find revenue. Of course, we must fight against global warming. But this green ISF is not the right tool, is not on the right plate and is not aimed at the right target.

If we want to impose punitive taxation on greenhouse gas emissions, because that is what the promoters of this idea are proposing, then there are smarter ways to do it. Establishing, on the polluter pays principle, a tax on plane tickets, for example, would still be more logical and easier to set up than this green ISF which would be a real gas plant.

► “The richer we are, the more we pollute”

Clement Sénéchal, in charge of climate policy campaigns at Greenpeace France

Our proposal to create a green wealth tax, in other words a wealth tax based on greenhouse gas emissions (GHG) induced by the financial investments of the richest households, starts from a double observation.

First, carbon taxation is today at a standstill in France. The carbon tax was frozen in 2018 following the yellow vests movement and the measures recently proposed by the Citizen’s Climate Convention are being rejected one after the other by the government. Result: climate action is paralyzed.

Then, we realize that the richer we are, the more we pollute. According to an OFCE study, the carbon footprint of households with the lowest incomes amounts to 15.2 tonnes of CO equivalent2 per year against 40.4 tonnes for those with the highest incomes. The richest 10% pollute about 3 times more than the poorest 10%.

If we take into account the impact of financial wealth on the climate, this difference is even more important. According to estimates by the specialist firm Carbone 14, the average financial wealth of the 1% of the wealthiest households emits 66 times more GHGs than that of the 10% of the least well-endowed households.

Hence the need, faced with the climate emergency, to reform French taxation to better distribute the effort between the different economic players. This requires a reestablishment of the ISF to which we propose to add a component whose scale would be based on the carbon footprint of the heritage and indexed to the value of the carbon tax.

This reform has three advantages. First, it makes it possible to move towards a more just transition through a better sharing of the effort, which will contribute to more social cohesion and to greater acceptability of the measures to be taken.

Second, it brings new revenue at a time when the recovery plan and the climate crisis are leading to increased public spending. The green ISF would make it possible to release around 10 billion euros per year, including 4.3 billion for the climate component which comes in addition to what the ISF reported when it was abolished in 2018.

Third, it should encourage the wealthiest households to decarbonize their wallets, to divest their money from activities that are most harmful to the climate and the planet.

So far, President Macron and his government remain stubbornly hostile to a return of the ISF while, at the same time, a number of reforms have benefited the wealthier categories – for example, the reform of the taxation of capital – and that public aid is granted to companies without social or environmental compensation.

But a sufficiently strong mobilization of civil society can change the situation. No leader can claim any political credibility if he does not tackle the climate crisis head-on.

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