Facing a complex social & taxation system

The french social system has reached such a level of complexity, incomprehensible to the citizens it is supposed to serve, it becomes legitimate to replace it by a new mechanism involving the synthesis of the existing. Indeed, the current lack of transparency is not necessary for the sustainability of the redistribution. Rather, we tend to believe that the citizens support the system even better if they understand how it works and "where their money goes"...

Philippe Mongin, a member of the French Council of Economic Analysis, invited to investigate this simplification when he wrote in the summer of 2008 in support of the RSA (Revenu de Solidarité Active):

"The transparency of the system of positive or negative transfers decided by the State - beyond, therefore, the solidarity system itself - is to be recommended because of the principle of democratic legitimacy. It is important not only that redistributive justice is achieved, but also that the community knows what it undertakes in this regard. It is not only the beneficiaries but also the taxpayer and citizen, who would see the benefits of the reduction of the current collection of mechanisms towards a simple and consistent allocation. Once they understand better the costs and benefits, the community can obviously choose to modify its initial commitments. The risk is twofold, namely that the citizen-taxpayer is reluctant to the enormity of the transfers and prevails in the collective decision or that the citizen-beneficiary wants to increase the benefits (...). Transparency exposes more an opaque allocation system to the fluctuations of politics. But that risk is precisely that of democracy, and it is therefore relevant to assume it. "

AllocationUniverselle.com contributes to this democratic action.

This site is built around a powerful tool: the only modeling of the french social system available on the Internet (updated in March 2009). Freely accessible to Internet users, the MAUF tool allows very precise analysis of the redistribution mechanisms at work in France.

Its primary objective is to calculate the function between the disposable income of a household's primary income. That is, make an inventory of all redistributive mechanisms applied to multiple configurations for linking household "labor income" and "living standards". The primary income may be of several types: salary, pension, unemployment insurance benefits, fees, income from properties, inheritance, etc. In all cases, we consider the "market value" of income. In particular, for employees, we do not take into account the gross wage, which has no economic sense, nor the net wage that puts aside the contributions received by the employee, but rather what is often called "super-gross wage", ie the sum of gross wages and employer contributions. In other words, all costs incurred by the employer.

Disposable income adjusts the primary income by many redistributive mechanisms. Among others:

RMI (Revenu Minimum d'Insertion), API (Allocation Parent Isolé), the Christmas bonus and now the RSA
Family allowances, the school allocation
The family quotient applied to income tax
The family supplement (supplément familial de traitement) for official employees
The various housing assistance mechanisms
The share of the PAJE (Prestations d'Accueil du Jeune Enfant ) under conditions of resource
The higher education grants distributed on social criteria
The employment premium: PPE (prime pour l'emploi) and the "prime de retour à l'emploi"
The progressive scale of income tax and the discount
The whole so-called tax expenditures targeting households
The progressivity and the capping of contributions
The differences in benefits or tax under the marital status (single, cohabiting, marriage or PACS, separation, widowhood), the number and age of children, level of schooling, any custody, alimony received or paid
The benefits of complementary mutual CMU
Railroads prefered tariffs offered to the large families and the olders
Residential and audiovisual tax exemptions
The social tariffs in France Telecom and EDF
The differentiated rates of school canteens and free public transport around Paris area...

The mechanisms are very numerous at the national level. At the regional or the city level, multiple aids are added, which no inventory has ever been done...

The MAUF tool allows for scenarios of wages evolution, graphically highlighting the contribution of a particular distribution mechanism for the formation of the disposable income of the household concerned. In the example below, the gross salary of one spouse moves between 0 and € 7500 per month.

(click on graph to analyze data)

This graph is not simple to read, because it bears many pieces of information. Let's explain it.

The "X" axis states the total monthly cost to the employer (gross wage plus employer contributions).

The "Y" axis shows the monthly disposable income of the household, showing:

under the x-axis, with negative impact, the taxation and social contributions. The first section, at the bottom shows also the tax exemptions on income which benefit the household (mostly the couple and family discounts).
in the form of a large triangular area, open to the right, vertically shaded in blue, the super-gross salary received. This wages pay the tax shown under the x-axis: income tax as well as social contributions paid by the employers. The top line of the shaded area is the net salary less income tax.
the top line shows the income available after implementation of national and legal mechanisms.

MAUF simulation results can also be extracted in the form of an Excel file for more detailed analysis.

(click on the graph to analyze data in Excel format)

Our modeling tool MAUF is freely available on the Internet. Feel free to use it to analyze the situations that interest you. This free access has a counterpart: we rely on users to help us identify and correct errors in this complex program.

To do this, please use the feedback form.

A basic income, the basis of a renovated system

We propose to replace the current complex system, by a mechanism ensuring a unique tax redistribution scheme without discouraging work.

The tax on personal income (IRPP) would be replaced by a Universal Income Redistribution Tax (IURR) which consists of two components:

a flat tax of approximately 30% of all income

a basic income, distributed to all citizens, with amounts varying with the age. In 2009 it would be around: 6€ per day for juveniles, 12€ for citizens betwwen 18 and 65, 19€ above 65 year old

This tax mechanism, applicable to all citizens, would replace many benefits, including:

Family allowances
Basic allowance of PAJE (for young children)
Revenu Minimum d'Insertion (RMI)
Revenu de Solidarité Active (RSA)
Allocation de Solidarité Spécifique (ASS)
Prime pour l'Emploi (PPE)
Single Parent Allowance (API)
Allocation d'Insertion (AI)
Scholarship on social criteria
Couple and family tax discounts
Other income tax discounts
Exemption from charges on low wages
Tax exemptions
etc.

In addition, the rules for calculating income replacement benefits would be revised. In particular:

The scales of pensions would be adjusted to neutralize the effect of the new tax rule. The IURR would also replace the current minimum pension (ASPA).
The current unemployment allocation implicitly includes two components: a minimum income assistance and insurance benefits related to previous contributions.
The calculation of disability benefits would be flat-rate instead of differential.
The minimum wage (SMIC) allows for a "minimum income for the worker". It would be modified to become a tool for regulating the labor market, probably negotiated independently in each branch.

Example of application:

For the case presented above, the chart is very much easier, even if ultimately the function of primary income redistribution is virtually unchanged:

(click on the graph to analyze data)

Restore the conditions of a real democracy

The french social model was founded in a period of full employment, on the Bismarckian model of social insurance: compulsory contributions are levied on the remuneration of workers to cope with the difficulties of life (sickness, disability, unemployment, old age). Since the first crisis of the 1970s, the need to protect those excluded from the wage has prompted successive governments to introduce social assistance, on the Beveridge model where taxes finance a safety net for the poorest.

RSA established in 2009 is also part of this process, ensuring the distribution of income for individuals with low earned income.

The establishment of a mechanism based on the basic income would clarify the respective roles of the actors.

The State provides a minimum level of social protection for all, including a basic income and management of disease and disability (Beveridge model), regardless of work or family situations.
The employer pays the employee according to a market price, possibly supervised by regulatory and finance complementary social insurance of their choice (Bismarckian model).
Every citizen enjoys systematic social assistance financed by the State, and adds any additional social insurance financed by his employer or himself.

The reform proposed here is extremely ambitious. It is nothing less than the synthesis of a century of gradual development of the welfare state. Everyone can legitimately wonder if the benefits are at the height of this huge maëstrom. In fact, they are many:

The same rules apply to all
The "rules of the game" are shared by all
Nobody is left in misery
Everyone gets more money if they work
Livelihood becomes a universal right, like hospital care and housing (DALO)
No particular situation is pointed at as no specific action or consideration is requested
Whether net recipient (inactivity or low income) or contributor (high income), no one may feel the victim of an unjust system
Very frequent cases of non-use, where people do not enjoy their rights, through ignorance or simple fatigue to administrative procedures, disappear entirely
The IURR distributing to all, by definition, the part that takes on all income, the fight against concealed employment becomes an objective shared by the whole population
Labor costs are lowered, increasing the economic attractiveness of the country
The cost of administering the complex current system decreases, to redeploy staff to other public missions of general interest
The differential logic of minimum social change: other revenues are considered as additional individual and situational income on top of a permanent universal income
Unemployment benefits become pure insurance mechanisms, in addition to a socialized universal income
The mechanism being attached to the person, individually, the complexity of "family calculation" of benefits, especially in the case of recomposed households , disappears
The trend observed statistically, to organize the legal composition of the household according to redistributive tax advantages also disappears
The calculation of tax at the source of income is widespread, also simplifying management while minimizing the risk of errors or fraud
...

Other pages on this site (in French) detail some of those messages.

Hoping that, like me, you will join those who are campaigning for the rationalization of a french social and taxation system which has evolved over the years into a deep inconsistency...

Marc de Basquiat - April 2009