Elected with the promise of liberalising the French economy, Macron has brought a wave of economic growth and prosperity to a previously fraught economy. Following the 2008 Financial Crisis, France suffered under successive Presidents who struggled to grapple with its aftermath; the unemployment rate refused to fall below 9%, rising to 11% under Socialist President Hollande between 2012 and 2016. Unsurprisingly, growth was sluggish, averaging below 1% during this period. However, following Macron’s ascension to the premiership, the French economy oversaw a swift turnaround. Economic growth boomed, averaging over 2% prior to the pandemic under his leadership; the unemployment rate fell to 7%, a 40-year low. Thanks to a cocktail of supply-side reforms: job-killing taxes slashed, welfare reform, and public sector efficiencies, the French economy has seen new life. Macron has pledged to continue with his successful long-term economic plan if he wins a second term. The election of Le Pen will bring chaos and misery through the return of far-left economic policies, taking France back to the days of sluggish growth and mass unemployment.
Tax cuts have long spurred economic growth and prosperity globally and Macron applied this recipe for success to the struggling French economy. The corporate rate was cut from 33% to 25%, spurring a wave of hiring and small business growth. In 2021 alone, a record one million businesses were created. A lower tax burden for job-creating firms represents a monumental shift in the French economic outlook. Slashing corporate taxes has led to greater investment by making the French economy more competitive, leading to the unemployment rate falling to the lowest level since the 1980s.
Income taxes have been reduced under Macron. For lower earners, the marginal rate for income earned between €10,064 and €25,659 has fallen from 14% to 11%. – a 27% tax cut. Increasing the disposable income of poorer individuals has spurred economic growth, giving individuals more freedom to spend their money however they please. A more efficient allocation occurs of resources is the result of lower taxes, as the private sector ensures that capital is utilised to its maximised productive potential, as a pose to government bureaucrats spending your hard-earned money on wasteful projects.
The so-called ‘wealth tax’, abolished under Macron, has stemmed the outflow of wealthy households from France. In the 1980s, a wealth tax was introduced by the Socialists on households with assets above €1.3 million. It is estimated that some 10,000 households with approximately €35 billion worth of assets left France between 2000 and 2015, because of this particular tax levy. The abolition of this tax marks a step in the right direction to reduce the capital flight that comes with oppressive taxes. As a result, there has been more investment into the French economy from wealthier individuals. French asset managers have seen their clients put less money into real estate and more into mutual funds. This provides much-needed capital for firms to invest in hiring more workers and productive, technological innovation.
“High tax rates that people don’t actually pay do not bring the government as much revenue as lower tax rates that they do pay”Thomas Sowell
Labour market reform
Reforming a tight labour market was one of Macron’s key objectives when coming to power. Deregulating the labour market by making it easier for employers to hire and fire workers has greatly contributed to the sharp fall in youth unemployment under his premiership; between 2014 and 2022, the rate has sharply fallen from 25% to 15%. The removal of excessive bureaucratic barriers has encouraged firms to hire additional staff instead of overworking existing staff due to administration costs. The cost of labour for French firms was further reduced through Macron’s reform of social security contributions. The €20 billion employer tax credit was abolished in favour of lower social security contributions for employees. This has had the effect of reducing labour costs for businesses by making it far cheaper to hire new workers, thereby increasing employment levels.
Similar to the Conservatives in the UK, Macron has promoted apprenticeships as an alternative form of higher education. State support for apprenticeships rose sharply under his presidency, increasing 25% for those under-18 and 60% for those over 18. This represents a much better alternative for students to earn money as they learn in-work, practical skills, as a posed to the largely theoretical learning that takes place at university.
A Second Term?
Macron intends to continue slashing personal and corporate taxes, alongside reforming welfare if elected for a second term. Reforming unemployment benefits is a key target, requiring those claiming benefits to undertake 15-20 hours of training or work weekly. This will ensure that the productive potential of the French economy continues to grow, by enhancing the employability of the unemployed. Macron has promised to cut business and personal taxes by €15 billion annually in a move that will spur economic growth by redistributing more capital to the private sector and away from government bureaucrats.
Ultimately, Macron’s first term represented a success for the previously lacklustre French economy. Whilst not as low as levels reached in both the UK and the US, unemployment has fallen sharply in la République, falling to levels not seen since the 20th century. Slashing and abolishing burdensome taxes on individuals and businesses has sparked a tide of investment into jobs and innovation, by ensuring capital reaches the most productive sectors of the French economy.