From the DW:
“German government moves to end
'solidarity tax' for eastern Germany”
Germany is planning to
drastically reduce its historical "solidarity" tax with its eastern
states. The move will mean a significant income tax cut for the middle classes,
but Merkel's CDU also wants to unburden the rich. Finance Minister Olaf Scholz
presented a draft bill on Friday for approval to other government ministries,
which would see 90% of taxpayers completely freed of the solidarity tax. The
extra tax, commonly known as the "Soli," amounts to 5.5% of income
tax and corporation tax. Another 6.5% of taxpayers would see their Soli
reduced. The tax, which brought the state €18.9 billion ($21.2 billion) in
2018, was first introduced in 1991 to help cover the costs of reunification and
invest in infrastructure in the former East Germany. It was originally meant as
a temporary measure but was made permanent in 1995. Germany's federal
government also agreed a "Solidarity Pact" with the state governments
in 2001, a plan that is meant to financially support the eastern German states
and lift them to economic parity with the former West. That pact expires at the
end of this year, and the president of Germany's Constitutional Court,
Hans-Jürgen Papier, concluded in May that the Soli should be abolished by then.
He argued the tax would effectively be unconstitutional if no pact was in place
as a framework within which to spend the money on the East. Since 2012, the
government has been collecting more money from the Soli than it spends on its
eastern states.
'First step' to total abolition
The two government parties,
Chancellor Angela Merkel's Christian Democratic Union (CDU) and Scholz's Social
Democratic Party (SPD), agreed to reduce the tax in last year's coalition
agreement. But the CDU is pushing for a total abolition, which would also
reduce the tax burden for the upper-income bracket and corporations. According
to calculations made by the daily Frankfurter Allgemeine Zeitung in June,
people with middle incomes could save up to €900 per year if the Soli were
abolished. Effectively, Scholz's plan means anyone paying up to €33,912 in
income tax will not have to pay Soli at all. "It is good that Finance
Minister Olaf Scholz is implementing the coalition agreement and taking the
first step toward reducing the Soli," CDU parliamentary group leader Ralph
Brinkhaus told the dpa news agency, "but we in the CDU are committed to
our aim of abolishing the Soli for all taxpayers. The phrase "first
step" also appears in the coalition agreement, though the SPD is
apparently reluctant to go further and get rid of the tax entirely. SPD deputy
parliamentary group leader Achim Post insisted that his party remained against
getting rid of the Soli. "We want to achieve more tax equality step by
step, but we certainly don't want to give away billion-euro tax gifts," he
said. "We need the money for investment in education and climate
protection." CDU General Secretary Paul Ziemiak said he was expecting the
Cabinet to approve Scholz's draft bill this month, "so that the money gets
to the citizens quickly." But Bernd Riexinger, chairman of the socialist
Left party, accused the government of "pursuing policies for the
well-off" rather than those that benefit society. "Only a few months
ago Finance Minister Scholz was warning against billion-euro holes in the
budget. Now he wants to unburden high earners. That doesn't fit together."
^ The Solidary Tax should be
abolished if it is not going to its stated purpose: to bring eastern Germany to
the same living standards as western Germany. It seems that the tax is not being
used for that purpose and so should be done away with. It is 29 years since
German Reunification and seems like getting rid of this tax should be done
sooner rather than later. If the German Government hasn’t brought eastern
Germany into the same living standards as western Germany by now than there is
an even bigger problem going on that needs to be addressed. ^
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