Economist Jens Südekum suggests that increasing taxes on the highest earners will be essential to fund an income tax reform. In a guest contribution to the “Handelsblatt”, Südekum states that higher tax rates for the top and wealthy brackets represent “a realistic option for counter-financing”. He emphasizes that implementing tax relief concentrated among small and middle-income earners “requires” this funding mechanism.
Serving as a cabinet adviser to Federal Minister of Finance Lars Klingbeil (SPD), Südekum bases his proposal on current budgetary constraints. He points out that lowering income tax rates in the lower progressivity bands would reduce total tax revenue. However, he cautions that these mere revenue gains “will not be sufficient on their own” to cover the costs of the reform, even considering potential growth effects.
Furthermore, Südekum dismisses generalized calls for savings as inadequate. He deems the suggestion that tax losses could be covered through reduced subsidies and lower administrative costs as unrealistic, arguing that “savings are always concrete” and pointing out that a concrete list of additional savings proposals remains elusive.
In addressing the argument that higher taxes on high incomes would negatively affect sole proprietorships, Südekum counters that these entities already have the option to be taxed like corporate entities under the existing options model. He adds that the state could make the transition to this model even less bureaucratic.
