France's 2026 Budget Proposes Social Security Freezes, Tax Bracket Freeze, and Labor Contract Changes to Curb Deficit
France's 2026 budget plans social benefit freezes, tax bracket freeze causing new taxpayers, and stricter labor contract rules to cut deficit by 2026.
- • The government plans a 30 billion euro effort combining new taxes and spending cuts to reduce the deficit.
- • Social benefits, particularly for retirees, will be frozen in 2026 saving 3.8 billion euros.
- • Income tax brackets will not be adjusted for inflation, adding about 200,000 new taxpayers.
- • Employer contributions on 'ruptures conventionnelles' will rise to curb frequent labor contract terminations.
Key details
The French government unveiled its 2026 budget proposal aiming to tighten public finances with a plan to generate around 30 billion euros in savings. Economy Minister Roland Lescure noted that 14 billion euros will come from new taxes and the rest from spending cuts, including a 25 billion euro reduction in expenses (excluding debt service increases), to reduce the public deficit from 5.4% to 4.7% of GDP in 2026 with the goal of eventually dipping below 3% by 2029. This budget draft remains open for parliamentary negotiation.
Key measures include a social security financing bill proposing a "blank year" for 2026, effectively freezing social welfare benefits, primarily impacting retirees, and expected to save 3.8 billion euros. Additionally, the government plans to freeze income tax brackets, meaning they will not be indexed to inflation next year—a break from usual practice. This freeze is projected to bring in an extra 1.9 billion euros and result in around 200,000 new households becoming liable for income tax in 2026, with many existing taxpayers facing higher tax bills. Notably, no compensatory measures to protect lower-income groups' purchasing power are included.
Further, the government intends to tighten regulations around "ruptures conventionnelles," a labor contract termination method widely used since its introduction in 2008. The employer’s social contribution on these dismissals will rise from 30% to 40% to discourage their frequent use, which led to over half a million cases forecasted in 2024. This move responds to concerns about disguised layoffs and resignations that impose roughly 10 billion euros annually in unemployment benefit costs, equivalent to a quarter of allocation expenses.
The income tax brackets for 2026 remain as follows: 0% up to €11,497; 11% between €11,498 and €29,315; 30% between €29,316 and €83,823; 41% between €83,824 and €180,294; and 45% above €180,295. The freeze contrasts with 2025, when brackets were adjusted upward by 1.8%, avoiding taxing 619,000 taxpayers amid 2.4% inflation. Inflation is expected to slow to 1.0% in 2025, yet the lack of indexation may still increase taxpayers.
These measures reflect the government's dual strategy to comply with European budgetary commitments and to contain public spending growth, despite cautioning against excessive tax increases. The finalized budget awaits parliamentary discussions and potential adjustments.