DIW: Let’s Bleed Germany’s 4.4 Million “Rich” – Two Thumbs up from Social Democrats, Greens, Unions

Published on 2012/06/16

The DIW German Institute for Economic Research, which is affiliated with the Social Democrats and the DGB umbrella organisation of the German unions, has come out with the proposal to ask “the rich” in Germany for a compulsory levy that would be earmarked for the rehabilitation of the federal budget. Social Democrats and Greens gave the idea two thumbs up, even if Jürgen Trittin, groomed for the post of federal finance minister by the Greens, signalled that he would be so “lenient” as to limit the compulsory levy on estates worth one million or more.

The DIW, by contrast, considers anybody fabulously well-to-do who owns at least 250,000 euros, because it would like to see a 10%-levy imposed on any estate exceeding this amount. According to media reports, this would mean that 4.4 million Germans would be subject to partial expropriation. My feeling is that the number of affected might actually be much higher yet, if you include property owners whose real estate assets push them beyond the threshold of 250,000 euros.

Still, the proposal falls short of the mark for the leftist party “Die Linke.” They went the idea one “better”: Anyone who earns more than 40,000 euros a month is supposed to be taxed at a rate of – wait for it! – 100%. To arms, Comrades, for a glorious socialist future!

If you think these are wild pipe dreams that will never be realised anyway you got another think coming. When I warned in this same publication against the plans of Hollande – at the time still just a candidate for the office of President of the French Republic which he then went on to win – to slap a 85% tax on any income of a million euros or more, I received a number of mails cautioning me not to take such campaign rhetoric at face value. After all, the writers argued, compromise is the stock-in-trade of real life politics. Anyone who thought so has now learned the hard way, because Hollande’s ideas have been written into law in the meantime, pushing the top tax rate in France up to 75%, which is boosted further by additional taxes and levies.

Why on earth are taxes in Germany to be raised in the first place? Tax revenues are pouring into the state coffers like never before due to several tax hikes and the robust economy. I, for one, have lingering suspicion that the taxes are to be raised in order to finance the “bailout packages” for countries like Greece, Spain, and Italy.

The well-to-do in Greece or elsewhere are probably rubbing their hands with glee, because many of them – this is no secret – are barely paying any taxes at all, and would just love the idea of having the “rich Germans” pick up the bill for them. Just think of how much enthusiasm for the European project and the Eurozone it will inspire if the “rich” German homeowners are to pay alimony for the “poor” Greek ship owners.

How, by the way, does the latter’s lot compare to that of the former? It doesn’t. Those 5% of Germany’s taxpayers whose income exceeds 92,750 euros already account for 41.8% of the tax receipts anyway! Conversely, the bottom third of Germany’s gainfully employed contributes barely 1% of the tax revenues. If nothing else, these figures put the often reiterated myth that the “the rich” in Germany evade taxation into perspective.

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