CDU wants tax re­lief for mid­dle, high-in­come earn­ers

Financial Mirror (Cyprus) - - FRONT PAGE -

The rul­ing Ger­many CDU/CSU is go­ing into the elec­tions with an eco­nomic and tax plat­form it hopes will ap­peal to a wide pub­lic, aim­ing to of­fer re­lief to those with medium and higher in­comes, ac­cord­ing to the FAZ/ifo Tax Cal­cu­la­tor.

On the other hand, the coali­tion part­ner and so­cial­ist SPD wants to ease the bur­den on medium in­come earn­ers and raise taxes on in­comes of more than 86,000 eu­ros. The Green Party favours in­creas­ing the top tax rate for in­comes ex­ceed­ing 100,000 eu­ros.

In their elec­tion pro­gramme, the Left Party would like to re­lieve low and mid­dle in­comes and raise taxes on higher in­comes. The FDP of­fers tax re­lief to medium and higher in­comes. On the FAZ.net web­site, all Ger­man tax­pay­ers can cal­cu­late the im­pact of the par­ties’ plans on their own sit­u­a­tion.

The CDU/CSU wants the cur­rent mar­ginal tax rate of 42% to ap­ply only for tax­able an­nual in­comes of more than 60,000 eu­ros. They also want to re­duce the bulge in the tax bur­den for medium in­comes. The ifo Institute based its model cal­cu­la­tions on the plans of the Small and Medium-Sized Busi­ness As­so­ci­a­tion of the CDU/CSU, which call for a re­duc­tion in the mar­ginal tax rate at the “kink point” of 24 to 20%. Th­ese plans also re­lieve in­comes from about 8,820 eu­ros a year, but to a sig­nif­i­cantly less ex­tent than for higher in­comes. Thus, a sin­gle per­son with 30,000 eu­ros of tax­able an­nual in­come would have a yearly tax sav­ings of 744 eu­ros, while a sin­gle with 60,000 eu­ros of an­nual in­come would save 1,637 eu­ros in tax. As a re­sult of th­ese tax re­duc­tions, state rev­enues would de­cline by around 22 bil­lion eu­ros.

The SPD also wants the high­est tax rate (42%) to be ap­plied only for in­comes ex­ceed­ing 60,000 eu­ros. Be­tween 60,000 and 76,200 eu­ros, how­ever, the So­cial Democrats want to in­tro­duce a new pro­gres­sion zone in which the in­come tax rate would rise to 45%. In ad­di­tion, the SPD would like to bur­den higher in­comes more heav­ily by in­creas­ing the top mar­ginal tax rate to 48%. House­holds with an an­nual tax­able in­come of 60,000 eu­ros would ben­e­fit the most. Those with more than 86,000 eu­ros would ex­pect to pay more, a sin­gle house­hold with 100,000 eu­ros in­come would pay about 450 eu­ros more in taxes per year.

The Greens‘ elec­tion plat­form calls for rais­ing the tax free al­lowance and in­creas­ing the top tax rate for in­comes of more than 100,000 eu­ros. Con­crete pro­pos­als re­gard­ing the tax scales are lack­ing, how­ever. The ifo Institute there­fore as­sumes an in­crease in the tax free al­lowance to 10,820 eu­ros and a lift­ing of the top tax rate to 45% for in­comes above 100,000 eu­ros.

The Left wants to

raise

the

tax

free al­lowance to 12,600 eu­ros. Ac­cord­ingly, sin­gles with 20,000 eu­ros of tax­able in­come would save about 1,200 eu­ros per year. The party also wants a longer rise in the sec­ond pro­gres­sion zone, so that with in­comes of 70,000 eu­ros a 53% a tax rate would ap­ply, match­ing the top tax rate that pre­vailed dur­ing Hel­mut Kohl‘s chan­cel­lor­ship. For sin­gle house­holds with an in­come of 77,000 eu­ros, the tax sav­ings from the in­crease in the tax free al­lowance and the raised tax rates for high in­comes would bal­ance out. In ad­di­tion, the Left plans a two-stage wealth tax with tax rates of 60% start­ing from 260,533 eu­ros and 75% for more than a mil­lion eu­ros. Ac­cord­ing to the ifo cal­cu­la­tions, sin­gle in­come-mil­lion­aires would pay about 138,000 eu­ros more in tax per year.

Over­all, the tax plans of the Left Party would yield an­nual re­duced in­come of about 7.6 bil­lion eu­ros for the state.

The FDP wants to “move the tax scale to the right” and flat­ten the tax “bulge” for medium in­comes. The FAZ/ifo Tax Cal­cu­la­tor has mod­elled this with a shift of the two kink points by 5,000 eu­ros each. This im­plies that the tax rate will rise more slowly from 14% to 24% and, in ad­di­tion, the top tax rate (42%) will only ap­ply to in­comes of more than 59,057 eu­ros. As a re­sult, sin­gle house­holds with an in­come of 30,000 eu­ros will save 587 eu­ros a year. House­holds with 60,000 eu­ros will save 1,214 a year. Ac­cord­ing to the FAZ/ifo Tax Cal­cu­la­tor, the FDP’s plans would re­duce the state’s tax rev­enues by 17 bil­lion eu­ros.

Mean­while, Im­mo­bilien Zeitung re­ported of “a hous­ing pol­icy of bro­ken promises.”

The pa­per re­ported that Ger­many’s Grand Coali­tion of CDU/CSU and SPD has failed to live up to its promises to in­crease the sup­ply of af­ford­able hous­ing.

Ac­cord­ing to an­a­lysts at DB Re­search, Ger­many’s coali­tion govern­ment has failed to achieve its two main goals: to re­duce the rate of rental price in­fla­tion and “sub­stan­tially in­crease” res­i­den­tial con­struc­tion vol­umes.

Analysing the new CDU elec­tion man­i­festo, the study’s au­thors high­lighted An­gela Merkel’s ex­plicit com­mit­ment to side­line the in­ter­ests of the SPD as it strives to de­liver 1.5 mil­lion new apart­ments dur­ing the next par­lia­ment.

Ac­cord­ing to DB Re­search, the CDU is con­sid­er­ing a range of po­ten­tially sen­si­ble mea­sures, in­clud­ing the tem­po­rary in­tro­duc­tion of de­clin­ing-bal­ance de­pre­ci­a­tion for prop­erty. The CDU also wants to sim­plify Ger­many’s mort­gage lend­ing reg­u­la­tions, a goal it shares with the lib­eral FDP.

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