On Monday, Martin Schulz, chairman of Germany’s Social Democratic Party (SPD) and chancellor candidate, presented his tax plan. He was flanked by two politicians representing opposing economic wings of the SPD: business-oriented Hamburg mayor Olaf Scholz and left-leaning parliamentarian Thorsten Schäfer-Gümbel.
Commentators in various media have described the proposal as “half-hearted,” a hedge that seeks to reconcile the two wings of the SPD, as well as the split between the party’s traditional voters and the upper middle class. We can look forward to the reaction of the center-right Christian Democrats and Bavarian Christian Social Union, majority partners in the Germany’s ruling grand coalition with the SPD. And let’s not forget the reaction of voters themselves.
The most important details are:
Those with lower and medium incomes – i.e. single party households or married couples with a taxable annual income of up to €60,000 or €120,000 respectively – will have their tax burden reduced by €15 billion per year through lower tax rates and various subsidies. Higher earners will see a tax hike to offset this sum.
The so-called “solidarity” surcharge, originally introduced to cover the cost of German reunification and until now regarded by the SPD as sacrosanct, is to be abolished beginning in 2020. Initially this would only count for singles or married couples with a taxable income of less than €52,000/€104,000 per year. The reactivation of a tax on assets, long a demand by the left wing of the SPD, is not included in the plan. This tax has been suspended since 1995.