Top earners should contribute more so that the middle class can gain. The CDU's tax ideas include actual new inheritance tax legislation.
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| CDU is planning a significant tax overhaul |
The CDU is considering raising taxes on high-income earners. To be able to alleviate persons who are subject to a portion of their income being taxed at the highest rate of 42 percent, the party appears to be willing to get more at the top rate. This stems from the notion being developed by the Prosperity Commission's chairman, Jens Spahn, and his deputy, Nicole Hoffmeister-Kraut. As if that weren't enough, there's also a true new inheritance tax regulation: instead of extravagant exemptions for firm successors, the CDU intends to apply a standard rate to all inheritances. The intent to release reserved profits is equally significant for the economy. Even trade taxes are on the table.
All of this is still a work in progress. This Friday and Saturday, the Commission's 13 members plan to finally discuss the 18-page proposals. The outcome should be incorporated into the new fundamental program. In principle, CDU head Friedrich Merz should accept the paper's objective.
Employees bear a bigger burden with each pay cycle because the income tax rate is progressive. For a number of years, the effect of inflation has been countered. This means that adjustments for inflation are considered (so-called cold progression), but not real income gains. Insidiously, many taxpayers are gradually becoming liabilities that were previously reserved for lower-income populations.
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The "hard-working middle class" will be helped. "We want to relieve the hardworking middle class and, as a result, significantly flatten the income tax rate," the architects of the responsible specialized commission argue. The top tax rate is now applied to income that is 1.5 times the average income. That is detrimental to performance. Entry will have to wait until later. "We will adjust the progression zones based on height for this." We want to get rid of the solidarity surcharge entirely. This is followed by the following: "In return, the tax rate for top earners in the top progression zone can increase in the sense of taxation based on ability to pay for particularly high incomes."
A performance-based tax system, according to the expert commission members, includes equitable inheritance taxes. The current system is overly complex, bureaucratic, and prone to abusive tax planning. "As a result, we are aiming for a uniform, low inheritance tax rate of 10% on the total transferred assets, including personal allowances, that applies equally to all inheritances."
To safeguard corporate assets, an interest-free deferral of inheritance tax for 10 years should be available. A wealth tax is opposed. Instead, simpler wealth creation for old age is being explored, such as a tax exemption for capital gains from stocks and mutual funds after a longer holding period. Aid for children's wealth building is also under consideration. There are two models described here: "10,000 euros at birth or 100 euros per month until the age of 18."
"Year of life" - this, however, is accompanied by six question marks.
To keep the site competitive, the expert committee proposes capping taxes on revenues retained in the corporation at "a maximum internationally competitive level of 25 percent." Furthermore, municipalities should "be permitted to levy surcharges on their share of income and corporation tax rather than trade tax."
However, in business, the work of the expert commission is viewed with mistrust. "The fact that the CDU is considering raising the top tax rate and changing inheritance tax affects family businesses in particular and leads to further disadvantages for them in Germany," Rainer Kirchdörfer, director of the Foundation for Family companies and Politics, said. The next year, tax receipts topped one trillion euros. The state has an expenditure problem, not an income problem. A single inheritance tax rate would disproportionately impact family businesses. "All experience indicates that the planned inheritance tax rate of 10% will not be retained," Kirchdörfer cautioned.