How the reform of the ISF changed the behavior of wealthy donors

The decline in the generosity of the French linked to the abolition of wealth tax (ISF) has made a lot of noise. In a note to be published on Tuesday, the Institute for Public Policy once again looked into this “exogenous shock” represented by the 2017 tax reform, in order to better understand the behavior of the wealthiest households in terms of donations. Based on the research work of economists Malka Guillot and Julia Cagé, the study highlights the importance of the political motivations of these donors.

The starting point is as follows: charitable and political donations benefit equally from an income tax reduction of 66%, while the wealth tax reduction of 75% only applies to charitable donations. By replacing the ISF with the real estate wealth tax (IFI), with a smaller base, the reform adopted during Macron’s first five-year term has divided by three the number of taxpayers. At the same time, it resulted in two-thirds of wealthy households finding it less advantageous to make charitable donations.