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A tax hike on high incomes cracks the German government


It should come as no surprise that Germany, a country dependent on Russian natural gas, has been the hardest hit by the West’s expulsion from Vladimir Putin’s country as a result of its invasion of Ukraine. Not surprisingly, in 2021, 55% of Germany’s imported natural gas came from Russia.

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The result of this economic disengagement from Russia is that Germany fears energy shortages this winter, and Chancellor Olaf Scholz’s government is scrambling to find alternatives to Russian hydrocarbons and develop expensive – and questionable – programs. Help to save the country’s economy. Germany is the largest economy in Europe and the fourth largest in the world.

Since the Russian invasion of Ukraine, many things have changed under Chancellor Olaf Scholz. The discussion here is, in fact, that the country is experiencing a “time of transition”, which is undergoing the above-mentioned economic disintegration from Russia, but also due to significant investment in defense and changes in foreign policy. At this point, the decades-long bridge between Berlin and Moscow is considered missing.

This “time of change” comes at a time when not only the identity of those running the Federal Chancellery has changed, as it has not even been a year since Angela Merkel stopped directing the German executive. Recent months have marked changes in the understanding of the policies – especially economic – developed in Berlin. Thus, in the last two years, the Advisory Council of Government Economists, composed of five highly respected German economists, has been renewed.

Monica Schnitzer, its president, and Veronica Grimm haven’t been there in two years. New faces in this group of economists who have worked for barely twelve months are Ulrich Malmendier and Martin Werding. The aforementioned conference is completed by Achim Truger, who became a member of that advisory board of the German Executive in 2019.

Based on the last works signed by these experts in the annual report 2022 and 2023, it can be said that the economists advising the German government are moving away from the ordoliberal theory that gave them so much to talk about during the crisis. of the euro. Ordoliberalism is understood as a German form of economic liberalism that posits the executive as an actor dedicated to establishing the conditions for free markets to exist. Liberalism is not characterized by special attention to the development of the welfare state. During Merkel’s time in power, it was the most fashionable economic doctrine.

The latest personnel changes by the Economist Advisory Council, however, seem to impose a change of direction. In fact, advisers to the German executive now defend the need to build new ones by 2022, given the country’s enormous efforts to support companies and households whose prices have risen by up to 8% since the start of the war. Taxes for the richest.

More taxes for financial aid

In particular, in the framework of the annual report for 2022 and 2023, the German government’s advisory council of economists has proposed a temporary increase in the so-called “maximum tax rate”, which is currently 42% from 58,597 euros per year. This percentage pays about 4 million German income taxes. However, that level is not a percentage of the taxes paid by Germans who consider themselves truly wealthy. These are those who earn more than 277,836 euros a year. Their tax rate is 45%.

In addition to raising the “maximum tax rate”, German experts have proposed to the Executive Board to create a charge for “energy unity”. Economists advising the government thus want a means of financing costly solutions to the energy and economic crisis stemming from Russia’s illegal invasion of Ukraine.

These palliative economic measures have forced, among other things, the creation of a special budget containing 200,000 million euros. With this money, the Teutonic executive, for example, wants to pay gas bills to households and companies next December. They want the money to help finance next year’s energy bill, which has been made more expensive by the Russian gas tap.

Regarding measures proposed by government advisers, conservative daily Frankfurter Allgemeine Zeitung This question was recently asked in its financial pages: “Are you a victim of this? Zeitgeist One of the last bastions of political thought?”, suggests the Advisory Council of Economists.

Council members noted that notable measures taken so far in Germany to combat the crisis – such as financing the price of gasoline so that it is around 2 euros per liter or tax cuts – have affected everyone in German society equally, from the most favored households to the least wealthy. Faced with this, the council’s ‘wise men’ see fit to “socially balance aid packages”, according to Veronika Grimm, a member of the advisory council of economists and professor of economic theory at the University of Erlangen-Nuremberg. “We’ve gotten poorer as an economy, so those who can afford it should share some of the cost,” Grimm said in an interview. Frankfurter Allgemeine Zeitung Posted last week.

Finance Minister against ‘wise’ experiment

Grimm wants these ideas to be discussed at least in Germany by the country’s top economic experts. However, the measures are not to the taste of the country’s tax authority, Liberal Party (FDP) leader Christian Lindner.

The proposals of the Advisory Committee of Economists are not convenient for him. “This is not the time when we need more insecurity,” Lindner said of the experts’ proposals. What’s more, listening to economists’ ideas, Lindner mentions what Grimm and company proposed as an “experiment.” “The government doesn’t want to do this kind of experiment,” said Lindner, who, along with environmentalist Robert Habeck, also holds the chancellorship in the German government as finance minister.

It is important for the FDP not to raise taxes in this assembly. In fact, in December last year, at the time of the three-way coalition agreement between the Social Democratic Party of Germany (SPD), Scholz’s establishment, the Greens and the FDP, Lindner’s liberals floated the idea that it stopped. The other two partners in the executive may express tax-raising intentions at the time.

So far, Lindner and his FDP had gotten away with it. However, what the Advisory Committee of Economists pointed out was, in the terms of the general newspaper of the German capital, perceived as “combustible material” in the Scholz alliance. Der Tagesspiegel. Lindner’s FDP has been in free fall as it embarks on its adventure into the executive with social democrats and environmentalists. It also seems that his political life is going to avoid tax hike.

However, participation in the executive does not sit well with the FDP. It thus appears that in the last election in Lower Saxony (West) last month, Lindner’s composition did not reach the 5% required to gain parliamentary representation. Earlier, this year also in the population elections the country In North Rhine-Westphalia (west) and Schleswig-Holstein (north), the FDP conceded significant electoral losses, just over 5%. This hurdle was also not overcome in the elections in Surrey (South West) in March.

At the federal level, there are already polls that attribute 5% of the vote to the FDP, far below the 11.5% it achieved last year in the first post-Merkel general elections. Below that 5%, the FDP will not enter Bundestag The next general elections are scheduled for 2025. It remains to be seen whether repudiating the ideas of the ‘wise men’ of the Advisory Council of Economists, the former defenders of German orthodoxy with which the FDP has been identified, sits well politically. with Lindner and the rest of the German liberals.

Source: eldiario.es/

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