politicians' positions

The Price of Tax Reform

Merkel cologne carnival scholz_effect
Chancellor Angela Merkel winning friends in Cologne in the western part of Germany.
  • Why it matters

    Why it matters

    If Chancellor Angela Merkel changes the tax system, and drops the solidarity tax designed to support east Germany following reunification, the move will come at a political cost.

  • Facts


    • Ms. Merkel seeks a slow phase out of the solidarity tax, which generates about €15 billion, or $18.2 billion annually, starting in 2020 and running through 2030.
    • She is willing to bargain with political foes such as Bavarian Minister-President Horst Seehofer and the Christian Social Union on issues such as inheritance and state and federal tax reforms to achieve her goals with the solidarity tax.
    • Slashing the tax complicates Germany’s efforts to maintain a balanced budget, dubbed Black Zero.
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Tired of the recurring debate over the solidarity tax enacted in 1995 to help fund the huge costs of reunification and economic development in the former East Germany, Chancellor Angela Merkel of the center-right Christian Democratic Union is taking steps to finally bring the so-called Soli tax to an end.

The actions by Ms. Merkel, who grew up in the former East Germany, bring her tax policies into alignment with the CDU’s economic wing, which has been unhappy about Soli for years, while also solidifying the ties between business and the party.

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