Leading economic advisor to the Federal Finance Minister, Jens Südekum, has indicated that tax increases could be necessary to address anticipated future budget deficits. In an opinion piece published in the Handelsblatt, Südekum outlined potential options, specifically mentioning a reform of inheritance tax and a higher top marginal tax rate for income tax impacting high-income earners.
Südekum’s rationale stems from concerns that previous tax rate reductions could disproportionately benefit even high-income individuals, including millionaires. He suggested that such broad-based tax relief would be unsustainable. Regarding potential increased burdens on partnerships, Südekum noted that the recent introduction of an opt-in model allowing them to transition into corporate taxation-which has already benefited from tax relief-would mitigate the need for additional levies.
Südekum projects a budget shortfall of approximately 30 billion euros within the core federal budget as early as 2027. This projection is attributed to factors including sluggish economic growth, rising social expenditures driven by an aging population and additional financial burdens on the federal government stemming from payments to states and municipalities. While stressing the importance of fostering economic growth – particularly leveraging investments and defense spending as crucial drivers – Südekum cautioned against relying solely on growth measures to solve the looming fiscal challenges.
