A Major Campaign for Higher Wealth Tax

Published on 2012/08/06

Leftist politicians are falling all over themselves these days with broadsides against “the rich,” and everyone has a yet better idea how to shake down, clean out and generally harass our country’s overachievers.

In the most recent development, a broad-based alliance including unions, social interest groups, and groupings like Attac has formed to fight for a higher taxation of the fabulously well-to-do. The alliance has the backing of the Social Democrats, Greens and the leftist party “Die Linke.”

The leftists, for one, are calling for a 75% wealth tax (modelled on Hollande’s tax regiment in France). For good measure, it is supposed to be supplemented by a net worth tax of 5%, so that it is only a matter of time before the “fabulously well-to-do” will be expropriated and the halcyon conditions that marked life in Communist East Germany will be restored.

Even the Social Democrats intend to raise taxes, and to raise the highest tax rate by a whopping seven percentage points to 49%, which together with the already existing 3% wealth tax would add up to a top tax rate of 52%. Needless to say, the Social Democrats consider the reintroduction of the net worth tax a splendid idea, too, on top of everything else. Oh, and yes: the flat-rate withholding tax should be jacked up from 25% to 32%.

Similarly, the Greens believe that the top income tax rate should be raised to 49% for incomes of 80,000 euros or more. Individuals with a personal wealth of more than 1 million euros should pay an extra levy of 1.5% p.a. for a period of ten years.

The argument fielded by these redistribution zealots, and you read it just about daily in the papers, goes something like this: “It is high time that those with a higher income finally did their part and contributed to the state’s finances.” The phrasing “high time” implies that “those with a higher income” have failed to contribute anything so far and that their tax burden is negligible.

Let’s take a look at the latest figures of the fiscal statistics that were determined by the Fraunhofer Institute for Applied Information Technology (FIT):

  • According to the state, the single percentile with the highest income (more than 184,701 euros in annual income before taxes or 15,391 euros a month) accounted for 22% of the total tax receipts in Germany.
  • The highest-earning 5% (92,130 euros in annual income before taxes or 7,677 euros a month) pay 41.5% of the income tax revenues.
  • The highest earning 15% of the population (more than 4,826 euros in monthly salary before taxes) bear nearly two thirds of the entire income tax load.
  • Conversely: Those 50% of the population who earned less than 26,191 euros p.a. or 2,182 euros p.a. before taxes accounted for merely 5.4% of the income tax revenues.

The idea spread by the redistribution-minded that the “those with a higher income” do not pay a fair share or none at all is simply proven untrue by these figures. But who cares about facts when ideologemes and the gratification of base envy complexes are at issue?

I am absolutely sure that the next federal elections will bring a hefty tax hike for the higher income groups and the affluent. Even among the Christian Democrats you will find many in favour of higher taxes. No matter whether we will get a re-edition of the Grand Coalition (the last grand coalition government was the one introducing the wealth tax of 45% for annual incomes of 250,000 euros or higher) or an alliance of Social Democrats and Greens: Taxes will soar in either cases because there is reason to believe that the one party that has stood in the way of tax increases – the Liberals – will no longer be a part of the government. The financial needs of the German Government will be higher than ever, because the redistribution machine in Europe – funnelling funds from north to south – will be running full tilt by then.

So if you are the owner of a corporation, you ought to think about a sizable advance distribution in order to take advantage of the current income tax rate at least for some of your income. It is probably your last chance to do so, or the second to last chance assuming the most favourable development.

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