Incomes of the richest groups have soared while poverty rates have increased. This summer, the National Institute of Statistics and Economic Studies (Insee) noted widening social inequality, pointing to an increase in median living standards in 2023 that benefits the richest, while living standards for the poorest decline. This time, in its social portrait published Tuesday, November 18, INSEE observed an increase in the average income of very high-income households between 2003 and 2022, much faster than all other households.
Who are we talking about? These 40,700 taxpayer households with a high standard of living are among the richest 0.1% of the population in terms of declared income. They most often come from the Ile-de-France region, are urban and are married or in civil partnerships and earn an average of 1 million euros per year (this amount is half of what it was twenty years earlier). In 2003, these very high-income households earned 21 times more than other households. In 2022, the number will increase 31 times.
At the end of the period studied by INSEE, these households had a total income of 42 billion euros, or more than 3% of the income of all French tax households. “In the early 2000s, they represented a total of 2 people %, that is equivalent to one point more in twenty years”compares Thomas Laurent, head of the statistics center of the Directorate General of Public Finance. Concretely, between 2003 and 2022, the average income of very high-income households more than doubled. “While the quarterly average income of the lowest-taxed households increased by just over 20 % only”underlines Thomas Laurent. If this gap occurs across all household incomes (including salaries, pensions, profits, and even dividends), this trajectory also occurs if we focus only on the evolution of wages, “those on very high incomes experienced larger wage increases than other tax households”, explained Thomas Laurent. “After all, those in the very high salary bracket were already part of that bracket fifteen years ago.”he added, noting that logically those who receive the highest salaries often retain their positions.
Regarding total other tax household income, if the increase is not very rapid, this is partly because this income basically consists of salaries or insufficient pension funds. “less dynamic than mobile capital”explained the statistician. In other words, salary and pension increases are smaller than the dividends received by the richest people. This last group experiences an increase in resources thanks to income from activities “more risky”especially those originating from mobile capital and land income. In fact, apart from being very dynamic, between 2003 and 2022, this share of mobile capital increased to represent almost half of the income sources of the richest tax households.
Another lever that made this huge increase in income possible: a reduction in the average tax rate. This figure fell from 29.2% in 2003 to 25.7% in 2022, a decrease of 3.5 points. Several reforms have contributed to reducing the percentage of taxpayers’ last-stage income that is subject to tax, “including reforms that reduced this figure from 48.09% in 2006 to 45% in 2012”explains the head of the department of household resources and living conditions at INSEE, Michel Duée. The implementation of a single flat rate levy in 2018 that applies to capital income also provides benefits for very high income. With an overall rate of 30% that does not take into account tax brackets or taxable income, this “flat tax” was created to reduce taxes on savings. As a result, in 2022, the richest 0.1% paid less tax and accounted for almost a quarter of total income tax. In comparison, the less wealthy groups of society, namely the richest 9.9%, contribute more than three-quarters of tax revenue.
