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Wealth and Income Responses to Dividend Taxation: Evidence from France

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  • Marie-Noëlle Lefèbvre

    (ESPI2R - Laboratoire ESPI2R Research in Real Estate [Paris] - ESPI - Ecole Supérieure des Professions Immobilières, CRED - Centre de Recherche en Economie et Droit - Université Paris-Panthéon-Assas)

  • Eddy Zanoutene

    (CRED - Centre de Recherche en Economie et Droit - Université Paris-Panthéon-Assas)

Abstract

This paper analyzes the responses of wealthy taxpayers to an important increase in dividend taxation in France in 2013. Using an exhaustive panel of French households liable for wealth taxation, we use a difference-indifference strategy to elicit responses of both incomes and wealth to changes in dividend taxation. Unsurprisingly we observe a decline in dividends payments due to the rise in dividend taxation. This drop is severe enough for the tax hike to actually result in a loss of government revenue. However, we show that this direct response of dividend to its own marginal tax rate is not sufficient to account for the total impact of the reform. Indeed, we document a significant increase in wealth in response to the tax hike on dividends, especially when we focus on financial wealth. This rise in taxable wealth mitigates the impact of the decline in dividends, although it does not completely offset the loss in government revenue.

Suggested Citation

  • Marie-Noëlle Lefèbvre & Eddy Zanoutene, 2022. "Wealth and Income Responses to Dividend Taxation: Evidence from France," Working Papers hal-04104173, HAL.
    • Handle: RePEc:hal:wpaper:hal-04104173
    Note: View the original document on HAL open archive server: https://hal.science/hal-04104173
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    References listed on IDEAS

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    1. Bertrand Garbinti & Jonathan Goupille-Lebret & Thomas Piketty, 2021. "Accounting for Wealth-Inequality Dynamics: Methods, Estimates, and Simulations for France," Journal of the European Economic Association, European Economic Association, vol. 19(1), pages 620-663.
    2. Raj Chetty & Emmanuel Saez, 2005. "Dividend Taxes and Corporate Behavior: Evidence from the 2003 Dividend Tax Cut," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 120(3), pages 791-833.
    3. Bertrand Garbinti & Jonathan Goupille-Lebret & Thomas Piketty, 2021. "Accounting for Wealth-Inequality Dynamics: Methods, Estimates, and Simulations for France," Post-Print hal-03474044, HAL.
    4. Bertrand Garbinti & Jonathan Goupille-Lebret & Thomas Piketty, 2021. "Accounting for Wealth-Inequality Dynamics: Methods, Estimates, and Simulations for France," PSE-Ecole d'économie de Paris (Postprint) hal-03474044, HAL.
    5. Adrien Matray & Charles Boissel, 2020. "Higher Dividend Taxes, No Problem! Evidence from Taxing Entrepreneurs in France," Working Papers 276, Princeton University, Department of Economics, Center for Economic Policy Studies..
    6. Bertrand Garbinti & Jonathan Goupille-Lebret & Thomas Piketty, 2021. "Accounting for Wealth-Inequality Dynamics: Methods, Estimates, and Simulations for France," Post-Print halshs-03231244, HAL.
    7. Bertrand Garbinti & Jonathan Goupille-Lebret & Thomas Piketty, 2021. "Accounting for Wealth-Inequality Dynamics: Methods, Estimates, and Simulations for France," PSE-Ecole d'économie de Paris (Postprint) halshs-03231244, HAL.
    8. Bertrand Garbinti & Jonathan Goupille-Lebret & Thomas Piketty, 2021. "Correction to: Accounting for Wealth-Inequality Dynamics: Methods, Estimates, and Simulations for France," Journal of the European Economic Association, European Economic Association, vol. 19(1), pages 707-707.
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    Keywords

    Dividend taxation; Wealth Tax; Efficiency;
    All these keywords.

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