That’s how expensive the CDU / CSU, SPD, Greens and FDP income tax plans are

SThe income tax rate has not changed for more than ten years: the initial tax rate is 14 percent, the maximum tax rate is 42 percent, people with very high incomes have to pay 45 percent to the tax authorities on the last euros of your income: the tax rate for the rich. And at the end there is the solidarity surcharge of 5.5 percent of the taxes to be paid in addition to that.

But a year before the federal elections there is a movement in the percentages. Not only that as of January the solidarity surcharge will no longer apply to many people. The federal finance minister and candidate for chancellor of the SPD, Olaf Scholz, wants to overcharge revenues of more than 200,000 euros more than before, he said in the interview with WELT-AM-SONNTAG. Anyone with an annual salary of around 100,000 euros could make a somewhat larger contribution to community funding than today.

Scholz is less concerned with extra tax revenue in the face of huge budget holes, but “mostly with a fair performance,” as he put it. The current maximum tax rate should only have an effect on higher incomes than today in order to “strengthen the low and middle income network.” In return, the tax rate for very high wages should increase moderately. How much stronger, Scholz did not reveal.

Not only the SPD is currently working on the details of the fiscal concept with which the party wants to enter the electoral campaign. Even the smallest changes in the income tax rate can have a big impact.

Depending on the political objective, there may be a 50 billion euro relief for the taxpayer or a new maximum tax rate of more than 50 percent. This is demonstrated by calculations from leading tax experts for WELT.

Maximum tax rate and solidarity surcharge

The first proposals have been made. If you look at the approaches of the CDU / CSU, SPD, Greens and FDP ranks, two common goals become clear:

First, low and middle income needs to be alleviated. After all, the top tax rate has long since ceased to be reserved for top earners. Today, about twice the median income is enough for the first few euros to be charged the marginal tax rate of 42 percent. Strictly speaking, this currently applies to singles for every euro above a taxable amount of 57,000 euros.

The second objective is to abolish the solidarity surcharge also for the highest income groups. It’s not about protecting higher-income taxpayers. Rather, the reason is that the Federal Constitutional Court could sooner or later deny the solidarity surcharge introduced 30 years ago in any case. Therefore, the surcharge must be integrated into the income tax rate.

There is currently a proposal from the SPD that contains specific percentages and income limits, specifically from Seeheimer Kreis, a group of “pragmatic SPD politicians,” as Chancellor candidate Scholz calls them, who show some sympathy.

Union and SPD models

Consequently, the current maximum tax rate of 42 percent for singles should only apply from a taxable income of 90,000 euros instead of 57,000 euros. For couples it is double. Keyword: Low and Middle Income Relief.

From an income of 125,000 euros, the maximum tax rate should increase to 45 percent. The Seeheimer Kreis wants to raise the tax rate to 49 percent on income over 250,000 euros. The former wealthy tax rate of 45 percent is only due for each additional euro from 270,000 euros.

A document from the two MPs Fritz Güntzler (CDU) and Sebastian Brehm (CSU) has been circulating in the ranks of the CDU and CSU for months.

To ease the burden on the lowest earners, they want to raise the first rate cap and allow the maximum tax rate of 42 percent to take effect at € 80,000 instead of € 57,000. Of a taxable income of 150,000 euros, it should be 44 percent, 250,000 euros after 47 percent.

Stefan Bach, tax expert at the German Institute for Economic Research (DIW), has calculated the consequences of the two proposals from the ranks of the grand coalition on state revenue: “The Seeheim model initially costs € 20.5 billion a year. “, he says.

In addition, there would be around 2,500 million euros less in withholdings at source and in corporation tax: if the only ones are completely eliminated, they will not be applied to this type of tax either.

You also have to consider that if people gave up more of their income, they could spend more money, which would increase the state’s VAT revenue. This is where Bach establishes additional income of up to four billion euros a year.

The end result would be either annual taxpayer relief or a burden on the family budget of nearly € 20 billion with the Seeheimer model.

CDU / CSU Proposal Brings 50 Billion Relief

Tobias Hentze, a tax expert at the Institut der Deutschen Wirtschaft (IW), who also analyzed the model of the SPD politicians, gets an annual relief of “more than 15 billion”.

The Güntzler / Brehm proposal from the Union camp would bring significantly greater change. Bach estimates the relief with this model at up to 45 billion euros plus the 2.5 billion euros omitted from withholding tax and corporate tax. Hentze even reaches 50 billion euros here.

The IW tax expert also examined the taxable income from which the individual citizen is released or charged. According to the Seeheimer district model, up to a taxable income of around 150,000 euros, in any case more than the gross salary would be maintained.

With the advancement of the CDU / CSU field, according to Hentze, all income recipients would have at least an annual taxable income of 300,000 euros more net than gross. It seems that almost everyone would benefit.

However, Hentze points out that the top tax rate is paid not only by well-paid employees, but also by associations – that is, employers. If the top tax rate went too high, they would be worse off than corporations.

Green replaces solos with a high top tax rate

Tax experts Bach and Hentze consider a model of the finance ministers of the green state of Baden-Württemberg, Bremen and Schleswig-Holstein to be largely revenue neutral.

To compensate for the total loss of solos, the maximum tax rate will be increased from the current 42 to 48 percent, but only from an annual taxable income of 150,000 euros for individuals and, consequently, 300,000 euros for couples.

Low and middle income should only benefit from an increase in the employee lump sum from € 1,000 to € 1,500. The effect of this increase is highly dependent on the individual case. For example, this has no consequences for those who claim higher advertising costs as travelers.

The FDP has also presented a model with which it wants to enter the electoral campaign. According to party information, the planned gradual abolition of the so-called middle-class belly on the income rate curve over three years should relieve taxpayers by 16 billion euros in the first year.

In addition, the maximum tax rate should only take effect from 70,000 euros. Relief effect per year: another nine billion euros. In addition, there is ten billion euros in aid through the total abolition of the solidarity surcharge. That makes a total of 35 billion euros.

Relief, yes or no?

The calculations hold great potential for controversy for the next federal election campaign. Especially since the crisis of the crown has changed the starting position. Instead of abundantly full coffers due to a one-year economic rebound, Finance Minister Scholz’s financial planning for the next legislative term is in the billions.

Can there still be any relief? Or is it necessary for citizens and companies to be relieved as soon as possible so that the economy can start again correctly and tax revenues increase again, at least in the medium term?

Relieve or burden who and how much? That is the question that all parties want to find an answer to in the coming months. To do this, the tariff curve can be flatter or more pronounced in all income groups and new percentage levels can be incorporated.

It should be noted that high-income people also have a low-wage area. They also benefit from higher tax breaks or lower marginal tax rates on the lower part of their income. This means that an increase in the maximum tax rate does not necessarily mean an additional burden. A considerable part of the income must be charged with the maximum tax rate.

DIW tax expert Bach illustrates this with an example calculation: to alleviate the middle income groups, to fully integrate the lonely and still avoid loss of income to the state, the maximum tax rate in the individual assessment Should it rise to 51 percent from a taxable income of 78,100 euros, the tax rate for the rich is even 56 percent. Taxpayers would be exempt from taxable income up to 90,000 euros, which would be charged above.