Government censure raises concerns about the 2025 budget, particularly regarding potential freezes on the income tax scale, which could lead to increased taxes for many. If the current scale is maintained due to a lack of indexing, around 380,000 households may enter the taxable bracket. The Constitutional Council’s ruling on the matter remains uncertain, with implications for taxpayers depending on whether the scale adjusts for inflation or not, highlighting financial impacts across various income levels.
Impact of Government Censure on the 2025 Budget
On Wednesday, December 4, the government faced censure, raising questions about the future of the 2025 budget, particularly regarding the indexing of the income tax scale. The most likely path forward for the departing government is to implement a special law that extends the budget at a minimum. One possible outcome of this scenario is a freeze on the income tax scale, leading to increased taxes for a significant number of taxpayers.
Understanding the New Income Tax Scale
When considering the new income tax scale, it’s critical to approach with caution as the situation remains uncertain. Laurent Saint-Martin, the minister in charge of the Budget, indicated in a recent interview that extending the 2024 budget could inadvertently include an additional 380,000 French households in the income tax bracket due to a lack of adjustment for inflation. Furthermore, 17 million households are expected to face higher taxes.
Is this outcome guaranteed? Not necessarily. Public law expert Vincent Dussart explains that a special law primarily focuses on maintaining minimum tax collection, which means relying on the previous year’s tax basis. However, the Constitutional Council might rule that failing to adjust the scale could be unconstitutional, as annual revaluation is typically expected.
Indexing the income tax scale has been a long-standing practice, reaffirmed by finance laws since 1969, with only 2012 and 2013 deviating from this rule. Without an approved budget, however, indexing cannot occur. The government’s and the Constitutional Council’s interpretations will play a significant role in this situation.
In summary, while a government censure could lead to a freeze on the income tax scale, this result is not guaranteed. The outcome remains uncertain.
What Changes to Expect in Your Budget
If the resigning government opts for a minimum special law, the existing scale used for 2024 income would continue to apply in calculating your 2025 tax based on your 2024 earnings.
To estimate your potential tax for 2025 under a frozen scale, you can utilize the current official simulator with your 2024 income. If your income rises, your tax will likely increase due to the unchanged scale. However, if your income remains stable, your tax liability will stay the same.
With an anticipated annual inflation rate of around 2% by Insee, many households are expected to see their incomes rise. According to Bercy, if the scale remains unfrozen following a government censure, approximately 380,000 households would become taxable. The Senate’s November report projects that the cost of indexing could reach 3.7 billion euros, highlighting the financial implications for households if indexing does not occur. It’s worth noting that the impact of indexing is anticipated to be lower this year at 2%, compared to the significant 5.4% and 4.8% increases seen in the previous two years.
In the absence of a 2025 budget, potential costs of freezing the scale can be illustrated through various profiles:
- Manon, earning just above the minimum wage in 2024, now has a net income of €1,426.30 after the recent wage adjustment.
- Sabrina earns €2,000 per month, roughly the median salary in France.
- Johan’s net income is nearly €3,000 per month, placing him above the national average.
- Amina and Gabriel, parents of two dependent children, each earn around €2,700 net per month.
- Elisabeth and Jacques, whose children have moved out, now earn approximately €4,200 per month each.
Should the censure result in a continuation of the 2024 scale into 2025, this would reflect a freeze that is less favorable compared to the originally intended 2025 scale, which would have been indexed to an inflation rate of 2%. A detailed comparison of these scales will highlight the financial impacts on each household.