Tax concepts of the parties: who provides more net of gross?

Tax hike for higher earners or not burdening anyone? Can the state even afford that given the high level of new borrowing? And what is really fair? An overview.

The 34-year-old Franziska worries when she thinks about her future payroll. Before the birth of her child, the single mother earned a good 40,000 euros as an employee at a subsidiary of Deutsche Bahn. The mother doesn’t get a keep and doesn’t know how much she’ll end up making when she goes back to work. Less by part time? And what does that mean for tax purposes?

She looks at the parties’ tax concepts with concern. Although they want to relieve everyone – the parties agree on this. But often it’s just a drop in the ocean every month, she says. The Center for European Economic Research (ZEW) has the tax concepts again for tagesschau.de looked at and calculated – for Franziska’s case and for top earners from 400,000 euros.

It quickly becomes clear that there are two camps in the parties – those who definitely want to burden top earners more heavily: the Left Party, the SPD and the Greens. And those who even want to give top earners tax gifts: the AfD, CDU / CSU and the FDP.

Relief for the left and AfD

The young mother would benefit most from the tax concepts of the Left Party and the AfD. According to the ZEW calculations, it would be relieved of 2940 euros annually for the Left Party, and 1920 euros for the AfD. At the AfD, this is due, among other things, to the so-called family splitting. Everyone in the household, whether they earn money or not, is taken into account for tax purposes – including Franziska’s baby.

“What this woman earns is divided by two. Income tax law is then applied to each of these partial amounts,” explains Albrecht Glaser of the AfD. This then leads to a lower tax burden. In addition, the AfD wants to completely reform the tax system and abolish many taxes – from property tax to inheritance tax.

“Half-baked tax ideas”

Sebastian Siegloch, author of the ZEW study, doubts the AfD’s tax ideas: “The AfD’s family splitting concept still seems a bit half-baked. In its current form it would be extremely expensive,” he says.

In addition, higher incomes in particular would relieve the burden – and very strongly: “This logic applies to most of the relief in the context of income tax: Those who pay more taxes today can also be relieved more through tax cuts.”

Tremendous differences in the top tax rate

In the second example of the ZEW calculation, this would be for tagesschau.de the case: a top earner with an income of 400,000 euros or more, for example a board member of Deutsche Bahn, a child, a single parent.

In contrast to other ZEW calculations, this time it was not assumed that the top earners have a fortune, and as a result, a planned wealth tax from parties such as the SPD or the Greens, or a property levy from the Left Party was not calculated.

“Kohl wasn’t a left-wing radical either”

Even without a possibly planned wealth tax, the Left Party asks the most to pay for annual income: 99,100 euros would burden top earners with an income of 400,000 euros more. The reason for this is a higher planned top tax rate in the concept of the Left Party and the plans to reform the social security contribution ceiling, explain the authors of the ZEW calculation.

Dietmar Bartsch, the top candidate of the Left Party, compares their tax concept with earlier times: “We want the top tax rate to start later,” he says. “It starts much too early now, but we also want to raise it. At the time of Helmut Kohl it was 53 percent. He wasn’t a left-wing radical – and that’s where we want to go again. “

Plans by the SPD and the Greens

The Greens and the SPD do not want to burden the top earners quite as much. At 400,000 euros, both parties would incur 10,000 euros more tax annually according to the ZEW calculation.

In the case of the SPD, this can be explained with a surcharge on income tax. “If you earn a lot of money, that is, as a single person 250,000 euros a year and a married person 500,000 euros, you have to pay three percentage points more taxes according to our concept,” explains SPD finance politician Achim Post.

The Greens also want to get high incomes: the top tax rate for incomes of more than 250,000 euros for single people is to rise to 48 percent. “That is an increase compared to today, but it affects only a few and is only a limited amount of the prosperity that this person has,” says Antje Hajduk, financial politician of the Greens, explaining their tax concept. The Greens want a wealth tax for the countries so that they can spend the money on education, said Hajduk. But that has to be achieved and negotiated together with the federal states.

Union and FDP want to abolish solos

The Union and the FDP want neither the top tax rates nor a wealth tax. They insist that they too want to ease the burden on small and medium incomes. At the same time, however, they want to abolish the solidarity surcharge for everyone and thus also for those with higher incomes. As of this year, the solidarity surcharge has not been levied for 90 percent of taxpayers, as the grand coalition had agreed on.

“The Union would like to abolish the solidarity surcharge for the last ten percent in the medium term,” said Antje Tillmann from the CDU. “Everyone would benefit from it, including those with higher incomes, and that’s right,” argues Betttina Stark-Watzinger from the FDP. The solidarity surcharge is no longer compatible with constitutional law.

Economists have doubts

Marcel Fratzscher, President of the German Institute for Economic Research (DIW), doubts whether the tax concepts of the Union and the FDP can be financed – above all when it comes to the abolition of the solidarity surcharge: “That costs another ten billion euros, and only benefits the top ten percent and they want to cap the corporate tax at 25 percent. That would also cost a good 17 to 18 billion euros a year, “said the economist.

All of this would only benefit the better-off, stresses Fratzscher. In addition, the debt is already high. At the moment the federal government has to take on new debts of 30 billion euros annually, which is not consistent with the debt brake. And that’s the irony, so Fratzscher:

The two parties that are most insistent on the debt brake, their tax plans are inconsistent with the debt brake. Those who least insist on it or want to modify it, as with the Greens, are consistent with the debt brake.

ZEW author sees many variables

For the author of the ZEW study, Siegloch, the tax changes could trigger behavioral reactions. It can be assumed that the wealth tax and the high tax rates in income tax could, in the medium term, lead to a migration of wealth and a reduction in income, so that tax revenues will be lower.

“At the same time, it is also conceivable that the relief for richer households in the Union and FDP will generate growth that will have a positive effect on tax revenues,” said the researcher. The bottom line, however, is that he would assume that the differences in fiscal effects between the left and right of the middle game will become smaller as a result of behavioral adjustments.