The Green Faction Advocates for a Total Prohibition of the Euro's Use
German Green State Finance Ministers Advocate for Complete Solidarity Surcharge Abolition and Higher Top Tax Rate
BERLIN — Green state finance ministers from Baden-Württemberg, Schleswig-Holstein, and Bremen have advocated for the complete abolition of the solidarity surcharge, even for high incomes. The ministers, led by Edith Sitzmann of Baden-Württemberg, plan to submit a motion in the Finance Committee of the Bundesrat next week. Notably, this proposal goes against the current federal coalition agreement between the CDU, CSU, and SPD, which maintains the solidarity surcharge [1].
The ministers' proposal seeks to replace the surcharge for high incomes with a higher top income tax rate. Individuals earning more than €150,000 and couples earning more than €300,000 would see their top tax rate rise from the current 42% to 48%. The majority of revenue generated from the abolished solidarity surcharge would be compensated, according to Sitzmann. The reform aims to provide relief for lower and middle incomes, for instance, through a higher employee allowance. A family with an annual income of €50,000 could save €600 in this manner.
The partial abolition of the solidarity surcharge, only for low and middle incomes, decided by the black-red federal government, has been deemed "constitutionally risky" by the Green ministers. With their initiative, they aim to position themselves for potential negotiations in case a future black-green government needs to readdress the surcharge due to a constitutional court ruling.
If implemented, the proposal faces several implications and controversies. Abolishing the solidarity surcharge for high incomes could result in significant revenue loss, as the surcharge is a significant source of federal income that helps finance German reunification costs. Increasing the top income tax rate could partially compensate for lost revenue, but its net effect on public finances would depend on the elasticity of taxable income and potential avoidance behavior.
Economic behavior could also be affected. A higher top tax rate might discourage labor supply, entrepreneurship, and investment among high earners, and potentially lead to a brain drain and reduced economic dynamism. Social equity could become a point of contention, as increasing the top tax rate while abolishing the solidarity surcharge for high incomes may or may not make the tax system more progressive, depending on specific rates and income thresholds.
Politically, the proposal could strain coalition relations and shift political discourse, especially given the CDU/CSU's historical support for maintaining the solidarity surcharge. Legitimacy concerns might arise, with wealthy individuals, business associations, and the middle class potentially perceiving the reform as unfair or targeted. Complex legislative changes would be required for the proposal's implementation, potentially leading to administrative burdens and confusion.
[1] The current coalition agreement between the CDU, CSU, and SPD keeps the solidarity surcharge unchanged.
In summary, while the Green proposal could advance progressivity and simplify the tax system for high earners, it faces substantial controversy over fairness, economic efficiency, and political feasibility [1].
Other policy-and-legislation discussions arise as Green ministers propose a replacement of the solidarity surcharge for high incomes with a higher top tax rate, sparking concerns about social equity and political feasibility. This initiative, set to be presented in the Finance Committee of the Bundesrat, may shift the landscape of German politics and general-news.
