The National Assembly restored inflation indexing for all income tax brackets on Wednesday, opposing the government's proposed freeze. This aims to prevent an additional 200,000 households from becoming taxable in 2026. Yet, its final adoption remains uncertain amid tense budget negotiations.
On Wednesday, deputies in the National Assembly voted to restore full inflation indexing of the income tax scale, set at 1.1%, for all brackets. This follows a similar vote in the first reading last autumn and counters the total freeze initially proposed by the government in the 2026 finance bill. Such a freeze would have imposed nearly 200,000 additional households and generated about two billion euros for the state.
The Senate had suggested indexing only the lowest bracket to protect small incomes, an option the government considered as a compromise. However, the chamber chose a full unfreeze, backed by the Renaissance group. "Rather than raising taxes on working France, let's assume savings," said former Prime Minister Gabriel Attal.
The Minister for Public Accounts, Amélie de Montchalin, expressed regrets, stating that "in the budgetary situation we are in, we could ask for equity a small contribution" from some households. This decision worsens the budget deficit, moving away from the government's 5% of GDP target, as MoDem deputy Jean-Paul Mattéi noted: "By yielding at every level, we are moving away (from the deficit target) to 5%".
Nothing ensures this measure will be included in the final budget, as the government could use Article 49.3 or an ordinance to end debates. Additionally, deputies approved extending the differential contribution on high incomes until the public deficit falls below 3% of GDP, and tax exemption for tips until 2028.
