A Comprehensive Income Tax (tréc)
CAE Deliberative Conference on the Taxation of Wealth and Capital
Friday 19 June 2026
A shared diagnosis
Regressive taxation, low taxation of (ultra)high income
A tax potential around 5 billion for the wealthiest (income def.) only (if Corporate tax is included in HNWI taxation)
Capital gain, France 1995-2024
- Over the last 30 years, price increase net of inflation tax represent 2.8 years of disposable income (1.8 years of GDP).
- With a maximum of 4.3 years in 2021
- around 170 billion € in 2024 (annualized)
- current tax revenu on capital gain is about 10 billion € (less than 6% of annualized flow of capital gain)
Comprehensive income
According to us:
it is difficult to tax wealth (valuation of assets, professional assets, localisation of assets)
it is difficult to tax unrealized capital gain (market value is volatile, non-market value can be manipulated -> incentive to go off-market)
It would be better to tax comprehensive income (Hicks, Haig Simon) (Haig 1921; Simons 1938; Hicks 1946)
\[R = C + dW\]
But capital gain (\(dW\)) are forward looking, hence not a legal basis for taxation (wealth taxation in the Netherlands).
Latent capital gain are an important part of (Haig-Simons) comprehensive income
Latent capital gain can be evaluated over a population, but are less likely to be set up against a given tax payer
Uncertainty is intrinsic (Mistral AI and Arthur Mensch, especially in capital raising) or can be manipulated (non public firms)
Taxing capital gain
There are major loopholes in capital gain taxation (at least in France):
- housing (main residence usually) exemption
- step-up in basis (effacement des plus values à la mort/transmission)
- holding period deduction or taper relief (UK) (abattement pour durée de détention)
See also Stiglitz, Summers and others in the US (see)
What we propose
Taxe sur le revenu économique certain (tréc)
Ascertainable Comprehensive Income Tax (ACIT)
- to tax comprehensive income, tax capital gain, with a flat rate
- when the uncertainty is (reasonnably) resolved, as a principle:
- a sale occurs, even the main residence
- a transmission occurs, as the valuation is needed for the beneficiaries of the transmission
- a Lombard loan is contracted, using assets as collateral: the bank needs a valuation
- exit of the territory (following EU ruling for instance)
- any other motive that could be used as a loophole and could be interpreted and a resolution of uncertainty
- possibly penalise long holding time by adding to capital gain tax an interest over the period of detention (Halperin and Warren 2014)
Nominal versus real
Holding an asset exposes to inflation tax. Money value of the asset is reduced each year, compensated by capital gain.
Ideally, real capital gains should be taxed (i.e. capital gain minus inflation tax over the years of holding the asset)
However, other capital income (dividend, interest rate) are usually taxed without deducting inflation tax (this is a problem, as the real tax rate can be over 100% when inflation rises). If capital gains are taxed with deduction of inflation tax, then there could be a massive shift toward capital gain only (accruing interest).
Scenario A: every capital income is taxed with inflation tax deduction (reducing tax base). Tax rate can be pushed as high as marginal tax rate of labor income (increasing tax base).
Scenario B: everything is taxed in nominal terms (no inflation tax deduction). Tax rate can hardly be over 30% when inflation is 2% and real rate is 2% as real taxation in that case is 60%.
Scenario A’: everything which is not capital gain is taxed in nominal terms (no inflation tax deduction). Capital gain are with inflation tax deduction and a flat rate of 50% (less incentive to shift to accrual of interest) despite sensitivity to the inflation rate.
Political economy
Introducing capital gain taxation without exemptions is going to produce a large number of losers (to be evaluated, the main residence part is important);
By combining the capital gain taxation reform with other reforms, one reduces the number of losers and increase the number of winners:
- Transaction (housing) tax removal (DMTO)
- Inheritance taxation (beyond a high threshold — individual wise, with a low tax rate, with no difference between direct/indirect transmission)
- Property tax reform (no need of a value basis, could be on an income basis as the Henry George taxation is operated through capital gain taxation)
Some advantages/disadvantages
Mistral AI
As long Arthur Mensch holds his participation, there is no taxation. Everytime he exits, he pays on the capital gain realized, minus inflation plus interests on holding period. When he exits completly (or dies), the full capital gain is realized and taxed. Problem, the tax revenu is delayed (but rich people die every year)
Any professional asset
Same as AM. But when the transmission is organized, then the taxation takes place.
Housing
Everytime you sell, you owe the tax. You can defer (subject to interest, non linearly possibly).
When you live in a normal place (Limousin), the real valuation is flat, no or very little taxation, even when a transmission occurs. On the contrary in high Henry George places (large urban centers), the taxation is going to be important. That’s fairer.
A wrong time profile
A lot of capital gain resolution occurs long after the action took place.
The transition will imply a low yield (if there is a lock-in effect)
Partially offset by the interest payed over the holding period
A wealth tax, as a down payment to future capital gains can be an option.
