Support for purchasing power: An increase in the tax burden is inevitable, but of what nature?

We illustrate our fairly general point with the case of France. The lowest-income wage earners are going to be hit by: The rise in energy prices, due to the rise in demand for goods, the war in Ukraine and then the energy transition; The rise in food prices, due to the war in Ukraine; The rise in housing costs, as negative real interest rates drive up real estate prices; The ongoing destruction of manufacturing jobs, due to skills problems and later the energy transition. Low-income households will therefore require some income support. This can be done in two ways, but both lead to an increase in the tax burden on other households: By increasing public transfer payments to low-income households, which would come on top of other increases in public spending (healthcare, reindustrialisation, energy transition, defence spending, etc.). Eventually, “real taxes” would have to be increased; By increasing low wages, which would inevitably lead to higher prices for goods and services produced with low-skilled employment. Other households would then be taxed by paying more for these goods and services. There will therefore inevitably be an increase in taxation , either through real taxes or in the form of higher prices.