The ISF is back in the public debate. The restoration of a solidarity tax on wealth, abolished in 2017 by Emmanuel Macron and replaced by the tax on real estate wealth, is on the program of at least three left-wing candidates: Anne Hidalgo, Yannick Jadot and Jean-Luc Melenchon. In the context of the climate crisis, the contenders for the Elysée are proposing a new kind of ISF, which this time would be “climate”. Franceinfo explains this measure to you.
Where does this idea come from?
LONG Greenpeace (PDF) proposes the establishment of a climate ISF in an October 2020 report. “With the movement of ‘yellow vests’, we asked ourselves the question of climate inequalities. The idea was to put on the table proposals for systemic, provocative public policies, capable of arousing controversy”, says Clément Sénéchal, the author of the report. Without the crisis of “yellow vests”, the measure would probably not have emerged, recognizes the climate spokesperson for Greenpeace France.
“The mobilization of ‘yellow vests’ against the carbon tax has demonstrated that the issue of social acceptability is a key element of the ecological transition.”
Clement Senechal, Greenpeace Franceat franceinfo
By reinstating the wealth tax in a new form, the NGO proposes to combine ecological taxation and social justice. Greenpeace is not alone in defending the measure. In its final report of June 2020 (PDF)the Citizen’s Climate Convention also mentioned the path of restoring the ISF, “or in a renovated form of the ecological wealth tax type”. The idea is also supported in an October 2021 report (in English) from the Global Inequality Lab. “Progressive taxation on the ownership of polluting activities could accelerate divestments [dans ces activités]reduce the level of pollution of the wealthiest and generate resources to increase investment in low-carbon infrastructure”explains the organization.
“In 2019, the richest 10% of the world’s population produced nearly 48% of global emissions.”
Global Inequality Labin his report
For its part, Greenpeace has been working over the months to convince politicians and is transforming its report into amendments which will be tabled by several left-wing deputies as part of the 2021 finance bill (voted in 2020). The amendments are rejected, but the measure is gradually arriving in the programs of the contenders for the Elysée, starting with the mayor of Grenoble, Eric Piolle, who defends the measure during the environmental primary.
What is the climate ISF?
Until 2017, the solidarity tax on wealth (replaced by the tax on real estate wealth when Emmanuel Macron came to power) concerned all taxpayers whose assets exceeded 1.3 million euros .
The climate ISF, in its first version imagined by Greenpeace, takes up the contours of the old solidarity tax on wealth, by adding a climate component. “It is a question of including the carbon footprint of financial assets in the calculation of the ISF, therefore in the calculation of the tax that is applied to large fortunes”, explains Clément Sénéchal. This tax would therefore be modulated according to the climate impact of the financial investments of the wealthiest households.
“Clearly, the more a fortune pollutes, the more it is taxed.”
Clément Sénéchal, climate spokesperson for Greenpeace Franceat franceinfo
It should be understood that each large French fortune finances, by its investments, more or less polluting activities. Affluent taxpayers would therefore have a kind of tax penalty linked to the carbon impact of their investments. To calculate this penalty, it will be necessary to define the average carbon footprint of the types of investments. The rate of the carbon component of this new ISF would then be backed by that existing in the carbon component of the domestic consumption tax on energy products (TIPCE), commonly known as the carbon tax. Since the “yellow vests” crisis, this rate has been frozen at 44.6 euros/tCO2eq (equivalent in tonnes of CO2).
In its report, Greenpeace explains the device by taking the example of a great fortune named Bernard, whose assets amount to 2.25 million euros. On the scale of the ISF version 2017, it would be liable for 9,150 euros per year. With the ISF climatic Greenpeace version, Bernard should pay to the public treasury the sum of 17,624 euros on the basis that his financial investments have a carbon footprint of 190 tCO2eq (i.e. 8,474 euros more).
Another, simplified, version of the climate ISF would consist of earmarking the money raised by the restoration of this iwealth tax in the direction of public policies in favor of the ecological transition.
Who is now proposing the measure?
Three left-wing presidential candidates are proposing a climate ISF or a measure approaching it. Yannick Jadot is committed in its program to create a climate ISF“from the first 100 days of his mandate”. “Financial assets today are the main reason why the richest emit five times more CO2 than the French on average”he explained to franceinfo in December.
The environmentalist candidate, who must reveal the details of his program on January 29, provides for an ISF affecting heritage over 2 million euros, with a broader base integrating professional assets and taking into account the carbon footprint. “There will be a bonus/penalty system on assets, initially on real estate (depending on the energy performance of the dwelling), then in a second phase (after one year), on the carbon footprint of financial investments, the time to set up a climate label”explains Eva Sas, political adviser to Yannick Jadot.
“You will have a penalty if your financial assets contribute, for example, to Total projects in Africa or the Arctic.”
Yannick Jadot, environmental candidate for the presidential electionon franceinfo
If the environmentalist candidate seems quite close to Greenpeace’s initial project, Anne Hidalgo defends a measure that appears to be simplified at first sight, but whose contours remain to be clarified. “I didn’t want to go into a complicated system”, she explains on France Inter, Thursday, January 13. The socialist ISF will therefore be “oriented towards environmental projects, but in social support”, she explains. In her program, the socialist candidate also specifies that “investments linked to fossil fuels will be overtaxed”.
On his side, Jean-Luc Melenchon proposes the restoration and strengthening of the ISF, including “a climate component aimed at taxing the big polluters”. The candidate of La France insoumise does not take up the climate ISF formula on his own but offers a close version, without giving details for the moment. “There will be a climate part which is added to the ISF and which will be proportionalexplains Eric Coquerel. For this, we will estimate the environmental cost of a person’s heritage.
What is the goal ?
For the left, the climate ISF makes it possible to reintroduce social justice in ecological taxation, after a five-year term marked by a sling around the increase in the carbon tax. “We need a tax system that generates social acceptability in sharing the climate effortexplains Clément Sénéchal. Not everyone has the opportunity to decarbonize their way of life…” By touching financial investments, the Greenpeace spokesperson also hopes to tackle the issue of production, “because for the moment, the liberal response has been to penalize consumption”.
“The first consequence of global warming is to increase inequalitiesabounds the climatologist Jean Jouzel, climate adviser to Anne Hidalgo. There are inequalities in CO2 emissions and in the consequences of global warming. For low incomes, it is the double penalty. In the event of a heat wave in Paris, for example, not everyone can take refuge in a second home in Brittany.
By targeting financial investments, the promoters of this new ISF also hope to provoke a reorientation of the investments of the richest towards a carbon-free economy. The measure would encourage “the wealthiest and most emitting households to divest from the most emitting activities by decarbonizing their assets”anticipates Greenpeace in its report.
How much could it bring to the state?
Another positive effect, the measure could yield “about 10 billion euros to the State”according to Greenpeace, which is counting on 4.3 billion euros in revenue thanks to the carbon component in addition to the 4 to 5 billion that the ISF reported before the reform. “But the revenue surplus may be temporary, if the big fortunes return to a cleaner wallet”tempers Clément Sénéchal.
Jean-Luc Mélenchon evokes the sum of “8 billion” euros on the board of BFM Business. For her part, Anne Hidalgo mentions the amount of 4 billion euros with her simplified measure, which corresponds to the amount collected by the ISF before 2017. In any case, this would be more than the tax on real estate wealth which grossed €1.56 billion in 2020.
Why is the measure not consensual?
The government, which methodically refused the amendments tabled regarding the climate ISF, continues to defend the abolition of the wealth tax, which it considers ineffective. “It’s pure demagoguery: we did it for years, it didn’t work, it didn’t enrich France, it didn’t improve prosperity”, assures the Minister of Economy and Finance, Bruno Le Maire. Conversely, contrary to the hopes of the government, the abolition of the ISF and the introduction of a “flat tax” have not led to measurable positive effects on the economy either, according to an opinion from France Strategy (PDF). “We still lack time to assess this type of effect”because it takes “time to materialize”Bercy nuance.
Beyond the economic opportunity or not of this tax, the feasibility of the climate ISF as imagined by Greenpeace or Yannick Jadot questions certain economists. “The system looks a bit like a gas plant. Starting to include indirect emissions via the inclusion of financial assets seems complicated to me and subject to a lot of recourse”says Paul Malliet, economist at the French Observatory of Economic Conditions (OFCE).“We have nevertheless made a lot of progress in terms of taxonomy at European level, we are fully capable of doing so”replies Eva Sas, on behalf of Yannick Jadot.
Another reservation: the financial assets of large fortunes are often placed by intermediaries (bankers or brokers), who have the necessary skill to circumvent this type of device. “It risks being a shot in the dark against actors who know the rules of the game too well”Judge Paul Malliet again. “It’s a popular and symbolic idea, but we risk having the equivalent of ‘carbon leakage’ for companiescomplete in The world Xavier Timbeau, director of the OFCE. French residents will invest in non-polluting activities, and polluting activities will continue, owned by Dutch or Germans.”