Imposing a New Tax: Affecting Millions of Citizens with Financial Burden
In our country, businesses are grappling with increasing financial burdens due to high taxes and levies, a concern shared by many citizens. According to a 2024 OECD study, our country has the second-highest tax burden, trailing only Belgium [1].
This high tax and levy burden is causing a strain not only on businesses but also on the health and pension systems. Despite high tax revenue, these systems are financially poorly equipped, with the aging of the population leading to high utilization and increasing costs for healthcare, while the number of younger contributors is decreasing [2].
To address these challenges, a new proposal, the "boomer solidarity tax" or "boomer solidarity levy," has been put forth. This tax targets higher-income pensioners, aiming to support low-income retirees and reduce elderly poverty by redistributing income within the older population [3].
The proposed tax would impose a roughly 10% levy on retirement income exceeding an allowance of about €1,000 per month, primarily affecting the top 20% of pensioner households. Meanwhile, the poorest fifth of pensioners would see their incomes rise by about 10 to 11% due to increased statutory pension support funded by this tax [3].
The goal is to reduce the poverty risk rate among the elderly from about 18% to just under 14% [1]. Critically, the tax targets well-off pensioners who have benefited from private savings or higher public pensions, while sparing low-income retirees [2].
Furthermore, retirement income exceeding 1,000 euros would be subject to this proportional levy, and income from assets could potentially be included under certain planning scenarios [3]. When employer contributions are considered, our country ranks third behind Belgium and Lithuania in terms of tax burden [1].
It's important to note that the political implementation of the "boomer solidarity tax" in the pension system is still undecided. However, this measure is meant to stabilize the pension system without placing additional burdens on younger generations and to address the financial strain created by retiring baby boomers [3].
The costs of health insurance and living expenses are also rising in our country, contributing to the overall financial burden on citizens. As the government continues to implement tax increases and consider new fees, the "boomer solidarity tax" represents an alternative approach amid broader social welfare cuts planned by the government [2].
[1] German Institute for Economic Research (DIW) [2] The Guardian [3] The Local DE
The Economic and social policy debates in our country have been intensified due to the financial strain on businesses and general news headlines, as high taxes and levies, including the proposed "boomer solidarity tax," dominate the policy-and-legislation landscape. Despite the second-highest tax burden in the world, the health and pension systems are still financially ill-equipped due to aging population demographics.
