Berlin On Thursday afternoon, the negotiators of the SPD, Greens and FDP begin their talks about a traffic light coalition in Hub27, a hall of the Berlin trade fair. They want to negotiate a coalition agreement in 22 working groups. Even before the first round, according to information from the Handelsblatt, it became clear that a working group could only achieve a meager result: finances and budget.
Tax policy will no longer play a major role in the coalition negotiations, say all three parties. Larger reliefs are just as off the table as the complete abolition of the solidarity surcharge called for by the FDP in the election campaign. You don’t really have to talk about that anymore, so the assessment.
The central sentence only describes what one does not want to do: “We will not introduce any taxes on assets and we will not increase taxes such as income, company or value-added tax.”
Top jobs of the day
Find the best jobs now and
be notified by email.
The Liberals have wrested the Social Democrats and Greens from giving up the tax increases they called for in the election campaign for top earners and entrepreneurs. The price for this: the relief desired by the FDP will not come either.
The FDP prefers plan B for solos
In return for a reduction in solos, the FDP would have had to accept additional burdens, such as a higher top tax rate. From the perspective of the Liberals, this price was too high: after all, the chances are not so bad that the Federal Constitutional Court will overturn the continuation of the Solis for some in the next electoral term. The FDP can therefore hope to achieve its great goal in other ways, without having to meet the SPD and the Greens.
Even if the tax policy stalemate suggested itself in the exploratory paper: The standstill with the announcement does not fit the renewal image that a traffic light coalition gives itself. The fact that all three parties had apparently come to an arrangement before the coalition talks began that they no longer wanted to negotiate major tax reforms will particularly disappoint the economy.
The solos are only paid by the ten percent of top earners. These include partnerships, such as craft businesses, which are subject to income tax. Corporations also have to pay the solos as a surcharge on corporate income tax. “Deleting the Solis would be a first step to make Germany more competitive as a business location,” says Rainer Kirchdörfer, Chairman of the Family Businesses and Politics Foundation.
This is underlined by a current survey by the Munich Ifo Institute on behalf of the Foundation for Family Businesses and Politics among 1,500 companies that the Handelsblatt has made available. According to this, two thirds of family businesses (67.9 percent) consider the abolition of the Solis “very suitable” and “suitable” for increasing competitiveness. For companies, the abolition of solos is the top priority in tax policy, even before a reduction in income or corporation tax.
“The next federal government should end the unequal treatment of the solidarity surcharge”, demands Kirchdörfer. The reason for this additional burden no longer existed when the Solidarity Pact for East Germany expired in 2020. Although there was no legal link between the Solidarity Pact and the solicitation, it was a political one.
Despite the impending standstill, economists have not yet completely given up hope of a tax reform. The institute of the German economy (IW), which is close to the employer, plays through in an analysis how such a reform could still succeed: if both red-green and the FDP move something.
A tax reform plan for the traffic light
The IW is proposing to increase the basic tax allowance to 10,500 euros, as the Greens are calling for. At the same time, the solidarity surcharge should be completely eliminated, as the FDP would like. In addition, all parties agree that the top tax rate of 42 percent will only apply from a higher income. According to the IW proposal, it should no longer apply at around 60,000 euros, but only from 70,000 euros.
In order not to unilaterally relieve above all top earners, the IW proposes to collect a new tax rate. From an income of 90,000 euros, a rate of 44.5 percent will apply in future. At the same time, the so-called “wealthy tax rate” should be raised from currently 45 to 47 percent and take effect from a taxable annual income of 250,000 euros.
Major reliefs for taxpayers hardly play a role in the coalition negotiations.
(Photo: imago images / Michael Gstettenbauer)
“Such a reform – considered together with income tax and solidarity surcharge – would not place a greater burden on any taxpayer than it is today,” write IW researchers Martin Beznoska and Tobias Hentze.
Those who earn little with 25,000 euros would have 107 euros more a year in their pockets as a result of the reform. Anyone who earns 80,000 euros, 1338 euros, the wealthy tax rate payer with 300,000 euros annual income would still come to 1252 euros.
The tax reform would not only relieve all taxpayers, it would also be reasonably moderate with revenue shortfalls of 17 billion euros per year. If one takes into account the higher growth that would result from the tax reform, the decline in revenue for the tax authorities should “turn out to be even less”, according to the IW.
Focus on other projects
But the explorers saw no way to take such a path in tax policy. The coalition negotiations will therefore concentrate on the design of the few compromise options, including, for example, the super write-offs on investments in climate protection and digitization as well as a simplification of the tax bureaucracy.
“Even the FDP had to realize that it makes no sense to reach into a naked sailor’s pocket,” it says from negotiating circles. There are huge gaps in budget planning; after the explorations, the holes have become even bigger.
The financing of many projects is unclear. The proposals, such as income from a better fight against tax evasion or from a minimum tax, have so far been rather hopeful. And the idea of circumventing the debt brake is controversial.
It is above all the budget that is likely to cost a lot of time and energy in the coalition negotiations. In this respect, the negotiators in the finance group have enough work to do. But it is not so much a question of shaping your own tax policy, but rather of looking for room for maneuver in the budget so that the other working groups can implement their projects.
More: Standstill in financial policy – where the traffic light coalition could become a GroKo 2.0