Discussions regarding a tax reform between the CDU/CSU Union and the SPD are gaining momentum. The Union parliamentary group has introduced its first concrete proposal. According to the reporting from Handelsblatt, fiscal policy experts Yannick Bury (CDU) and Florian Dorn (CSU) have developed a concept aiming to relieve all taxpayers by a total of 25 to 30 billion euros annually. This plan includes proposals for offsetting the costs through measures such as reducing subsidies.
In an article published for Handelsblatt, the two Union members stated that they propose reforming the income tax framework to provide tax relief to all incomes, with a proportionally higher relief for small and medium incomes. Their concept suggests increasing the basic tax-free allowance by “at least 1,000 euros”. Furthermore, the top tax rate of 42 percent would only apply to taxable incomes starting at 85,000 euros, rather than the current threshold of around 70,000 euros. Additionally, the solidarity surcharge would be eliminated for everyone. The “wealth tax rate” meanwhile, would be proposed to increase from 45 to 47.5 percent, applicable from a taxable income of 210,000 euros, up from the current threshold of 277,826 euros.
Nevertheless, even high earners would see overall relief, partly due to the removal of the solidarity surcharge. Dorn commented that “the marginal tax rate in the upper range can only be slightly adjusted if the solidarity surcharge is eliminated and all taxpayers are further relieved”. Bury added, “We do not need to burden anyone more to relieve others”.
To finance the potential tax revenue loss of up to 30 billion euros, Bury and Dorn propose cutting subsidies and implementing consistent savings within the federal administration. They suggest that the federal financial aid should be reduced annually by 15 percent over three years, utilizing the lawnmower method. These cuts would free up an estimated 22 billion euros. For the administrative costs, they aim to save nearly eight billion euros annually.
