According to the Ifo Institute, the federal government’s plans to raise the wealth tax and increase the contribution assessment ceiling in statutory health insurance (GKV) could lead to billions of euros in revenue shortfalls.
Andreas Peichl, head of the Ifo Center for Financial Science, told the “Bild” newspaper that the tax burden on high and upper-middle earners is already at its limit. He warned that implementing these changes related to the wealth tax and the contribution assessment ceiling could result in “lower revenues amounting to several billion euros.”
Peichl explained that the reason for these potential losses is that higher tax burdens might cause affected individuals to reduce their working hours or actively seek ways to lower their tax liability, such as increasing deductible expenses.
As an alternative way for the state to increase income, Peichl suggested reducing exceptions within the income tax system. He stated that if the Finance Minister wants to increase state revenue, they should instead focus on ensuring that citizens are able to deduct fewer items from their taxes. Currently, there are over 500 different items eligible for tax deduction, such as expenses for tradespeople or membership fees, a number that is more than twice the OECD average. Peichl estimated that if half of these deductible items were removed, the state could collect around an additional 35 billion euros in taxes.
