The FDP politician wants to expand funding for wealth creation – including for higher earners.
(Photo: IMAGO/Jochen Eckel)
Berlin Federal Finance Minister Christian Lindner (FDP) wants to strengthen Germany as a start-up location with a reform of employee capital participation. But the draft for the “Future Financing Act” also includes support for higher earners: taxpayers’ money should make it easier for them to accumulate assets.
It is about the so-called employee savings allowance. The state uses it to promote capital-forming benefits, i.e. cash benefits or wage components that the employer invests for the employee. In the case of employee participation schemes and certain forms of securities savings, the state assumes 20 percent of the capital-forming benefits invested, provided these do not exceed EUR 400 per year – i.e. a maximum of EUR 80 per year.
However, only if the employee’s taxable annual income does not exceed EUR 20,000 for single people and EUR 40,000 for couples.
According to the draft, Lindner now wants to completely eliminate this income limit. In addition, the maximum eligible savings amount is to be tripled to 1,200 euros. Employees can then have the state subsidize their capital formation with up to 240 euros per year – regardless of how much they earn.
This generosity on the part of the finance minister has drawn criticism from the Landesbausparkassen (LBS). “Actually, dependent employees with a small income should be supported in wealth accumulation,” said LBS association director Axel Guthmann to the Handelsblatt.
He believes that top earners would simply take the tax money with them and put it in their long-standing securities accounts. “Germany doesn’t need any savings incentives for higher earners.” Critics are reminded – albeit on a much smaller scale – of the “Mövenpick” tax, a VAT reduction for the hotel industry enforced by the Liberals.
Lindner is not planning any changes to building savings
The building society associations had informed the Ministry of Finance in a letter at an early stage that, from their point of view, government savings subsidies for higher earners were not only unnecessary as an incentive to save. It also withdraws “budget funds from a more sensible use”.
However, the building societies are also speaking up in their own interest. Because Lindner wants to improve the conditions for employee participation and share investments in capital-forming benefits, but leave everything as it is when it comes to home savings.
An income limit of EUR 17,900 for singles and EUR 35,800 for couples should continue to apply here. The subsidy rate is nine percent up to a savings amount of 470 euros, the maximum subsidy should remain at 43 euros per employee and year.
Read more about wealth creation
“We consider another one-sided improvement in favor of saving in shares to be completely counterproductive against the background of the increasing difficulties in acquiring residential property,” criticizes Guthmann. So far, home savings is clearly ahead when it comes to using employee savings allowances.
According to a recently published study by the research and consulting institute Empirica, which is based on the income and consumption sample from the Federal Statistical Office from 2018, 4.5 percent of employees used the state savings allowance for home savings. Only 1.1 percent used them for securities saving, 0.1 percent combined for both forms of saving.
Overall, according to the subsidy report, the federal, state and local governments spent almost 1.2 billion euros on savings promotion and capital formation last year, of which the federal government accounted for a good 500 million euros. The employee savings allowance made up only a small part of this with a total of 61 million euros and 26 million euros for the federal government.
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