Economist Feld and employers criticize calls for tax increases

Berlin The five economic wise men have triggered a heated debate with their call for tax increases for higher earners. The former chairman of the council of experts, Lars Feld, thinks the proposal is wrong. “If I were still on the Council of Experts, I would have drafted a minority vote when proposing the tax increases,” Feld told the Handelsblatt. However, he believes that there would not have been a majority if he and Volker Wieland were still council members.

In its new annual report, the Advisory Council, to which Feld belonged until February 2021 and Wieland until April 2022, proposes levying an energy solo for higher earners or increasing the top tax rate.

The five economists justify this by saying that the aid provided by the electricity and gas price brakes would not be distributed socially and that taxes should therefore be used to create more justice.

The five economic experts handed over their report to Chancellor Olaf Scholz (SPD) on Wednesday afternoon, and they will present it to the public in the afternoon. It should also cause discussions in the traffic light coalition. While the SPD and the Greens are open to tax increases for higher earners, Finance Minister Christian Lindner (FDP) has repeatedly rejected them.

Top jobs of the day

Find the best jobs now and
be notified by email.

Feld, who is Lindner’s independent chief economic advisor, said: “This proposal is not compatible with regulatory policy.” He could not imagine that a government with FDP participation would implement it. The government cannot bother citizens with tax increases just because the state does not design its relief precisely for administrative reasons.

>> Read here: Interview with Head of Economics Schnitzer – “Tax increases should really only affect the top earners”

According to Feld, politicians must relieve transfer recipients if they want to proceed in a more socially just manner. “For people on low incomes who are overburdened by high energy costs, tax deductions for gas bills could also provide relief,” Feld suggested. The taxation of the energy price brakes also makes them more targeted.

Employers fear stress in the middle of the crisis

While other economists like economics professor Rüdiger Bachmann are positiv commented on the initiative of the council of experts, criticism comes from the economy. “In view of the multiple challenges for companies, politicians are called upon to do everything to secure jobs in Germany as a business location and to secure value creation,” said Employer President Rainer Dulger. “Tax increases are definitely not one of them.” Dulger said that the Federal Finance Minister was therefore expressly supported in his negative attitude.

The Secretary General of the CDU Economic Council, Wolfgang Steiger, spoke of a “double bang in terms of hostility towards performance” with regard to a higher top tax rate and energy solos.

This proposal is not compatible with regulatory policy. Lars Feld

Dulger: “Continuing to burden small and medium-sized businesses between the energy crisis and inflationary pressure is an adventurous plan and goes in exactly the wrong direction.”

Around four million people pay the top tax rate

According to estimates by the Federal Ministry of Finance, in 2021 around 2.8 million taxpayers were subject to part of their taxable income at the top tax rate. That is around 6.5 percent of all 43.4 million taxpayers. Since spouses are sometimes counted as one taxpayer, there are absolutely more taxpayers paying the highest rate: around four million people. They would potentially be affected by an increase in the top tax rate.

Currently, the top tax rate is due from an income of 58,597 euros. In order to compensate for the so-called cold progression, Finance Minister Lindner is planning a change. In 2023, the top tax rate only has to be paid from an income of 62,826 euros and in 2024 from 66,778 euros. The cold progression describes a creeping tax increase through the interaction of high inflation and the progressive tax rate. In addition, Lindner wants to raise the basic allowance and the child allowance.

According to the plans of the Ministry of Finance, the tax rate for the wealthy of 45 percent should remain unchanged and continue to be due from an annual income of 277,826 euros. The traffic light coalition wants to prevent top earners from being particularly relieved when cold progression is reduced. This was particularly important for the Greens and the SPD.

Lindner had expanded its inflation compensation law in early November. Because of the higher inflation, the government is now planning a tax adjustment of 15.8 billion euros in 2023 and 29.3 billion euros in 2024. That is a total of 15 billion euros more relief than previously planned.

>> Read here: Over 1300 euros relief for families – Lindner wants to completely compensate for cold progression

The Greens had viewed the expansion critically. The Advisory Council is also skeptical. Lindner’s plan is basically correct. “In the current situation, in which relief for lower income groups in particular appears necessary and the situation of public finances remains tense, it would be advisable to postpone this equalization to a later date,” writes the committee.

Reduction of cold progression and higher child support

However, the traffic light coalition has now reached an agreement and passed the Inflation Compensation Act in the Finance Committee on Wednesday. “We have successfully pushed through the complete dismantling of the cold progression,” explained FDP parliamentary group leader Christoph Meyer.

The Greens have achieved an even greater increase in child benefit. It should increase to 250 euros per month from 2023. This is the result of the negotiations on the inflation compensation law, said Andreas Audretsch, deputy leader of the Greens. “The sharp increase in child benefit is an important step in supporting families in difficult situations,” said Audretsch. This is how you help families with small and medium incomes as well as single parents in particular.

More: Who bears the greatest tax burden? New data clears up old myths

source site-12