Fiscal Fairness

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'It's Time for Germany to Deliver Tax Cuts'

A recent estimate predicts a further increase in German tax revenues of €120 billion by 2018. Source: DPA
A recent estimate predicts an increase in German tax revenues of €120 billion by 2018.

Open any newspaper in Germany these days and you might get the impression that the government in Berlin was waging a heroic struggle to get the country’s public finances under control.

That would be wrong, even absurd, as a look at tax revenues since the middle of last decade clearly shows.

It all changed back in 2005. For the five years before then, tax revenues were in decline or stagnating, but they have boomed ever since. From 2005 to 2013, overall tax revenues in Germany increased from €452 billion ($605 billion) to €620 billion, a 37 percent increase and average annual growth of four percent – despite a severe slump following the global financial crisis in 2008.

All levels of German government – federal, state and local – profited from the tax windfall.  So there’s no questioning the financial sacrifice the public has paid, especially with what Germans call “cold progression” – when wages rise only to meet inflation but still force earners into higher tax brackets.

Comparing tax revenues to employees’ incomes makes this clear. Between 2005 and 2013, incomes increased less than one percent annually. In short: German taxpayers went without while the state profited. To a certain extent it was necessary to help the country out of the trap of unemployment, increasing social costs and debt. In effect, what happened in Germany is what German politicians are demanding today from their crisis-ridden partners in the European Union.

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