Ifo chief Clemens Fuest warned the coalition parties that raising Germany’s top income‑tax rate would have negative consequences for economic growth, particularly because it would burden companies organized as partnerships. He added that increasing the inheritance tax is not a solution either, since a realistic reform would not generate the extra revenue needed for a noticeable cut in income‑tax rates.
Fuest made it clear that tax cuts cannot be achieved without first reducing state spending. While it is theoretically possible to cut taxes, take on new debt, and then pressure the government to cut spending, the federal debt brake limits how much borrowing is allowed. Therefore, the priority must be to lower expenditures before any tax relief is introduced.
