Wealth and Income Responses to Dividend Taxation: Evidence from France

Marie-Noëlle Lefèbvre () and Eddy Zanoutene ()
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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

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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.

Keywords: Dividend taxation; Wealth Tax; Efficiency (search for similar items in EconPapers)
Date: 2022-03-29
New Economics Papers: this item is included in nep-pbe and nep-pub
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