Germans already pay a lot of taxes. The value added tax (VAT) was raised in 2007 to 19%. The state grabs 42% of any income above €52,882 and 45% of any income above €250,731. The list goes on: church tax, solidarity tax (“temporary,” to bail out East Germany), gasoline tax…. Not much is left over when a German is through paying taxes.
With consequences, among them: twenty-year decline in German retail sales and a national passion for tax evasion. So, with an eye on the economy in the midst of a debt crisis, the conservative CDU, the party of Chancellor Angela Merkel, and its sister-party from Bavaria, the CSU, campaigned on a categorical pledge not to raise taxes.
“We don’t want to punish the top performers in the middle of our society with tax hikes for their efforts and daily work, but relieve the burden – unlike Red-Green,” a campaign flyer said (via Bild). Red-Green, the opposition pair of SPD and the Greens, inexplicably campaigned on jacking up the top income tax brackets and imposing a wealth tax, among other beloved goodies.
Merkel herself emphasized during a debate with her top challenger, Peer Steinbrück, on September 1, that “we must get by, and we can get by too” with the current tax revenues. “If we put people who create jobs into a situation where due to the wealth tax and higher top income tax rates they no longer create jobs … that would be exactly the error….” Three days before the election, she warned: “Never put solid growth in jeopardy through tax increases.”
The pledge was successful. On September 22, the CDU/CSU won with (for Germany) a phenomenal margin that left them only a few seats short of an absolute majority. But their traditional coalition partner, the FDP, didn’t clear the 5% hurdle and got kicked out of parliament. Now, in order to be able to govern, the consummate political has to form a new coalition – with the SPD or the Greens. Or face new elections.
Kiss of death is what such a coalition is considered on the left among the rank and file, though the top echelon would love to grab some juicy ministerial jobs and taste the luxurious sweetness of power that come with being part of the government. The Finance Ministry for Steinbrück? Hardly. But he did have that job under Merkel during the last Grand Coalition. So maybe the Foreign Ministry? During this sort of horse-trading, planks of one campaign platform are junked, and planks from the other are inserted. In the process, the future coalition partner exacts their pound of flesh.
Suddenly, a hullaballoo has broken out. Only three days after the election, the conservatives started preparing those people who’d voted for them based on the parties’ categorical rejection of tax hikes, for what is to come: tax hikes.
To heck with campaign promises. They’re like so September 22. The consummate political animal has already moved on.
The message is trickling out from all sides. It was leaked that CDU General Secretary Hermann Gröhe told other members of his party during a phone conversation that, in the negotiations with the SPD and the Greens over forming a coalition, there would have to be an agreement about raising the top income tax rate from the current 45% to 47% or even 49%.
Finance Minister Wolfgang Schäuble, when cornered by Die Zeit, suddenly refused to exclude that higher taxes might become part of the program. “We want to see how the talks are going,” he said. For sure, he was “personally of the opinion that the government doesn’t need additional revenue sources.” But…. “If the future partners of a future government are equipped with a minimum of reason, then you can always come to an agreement.”
CDU deputy chairman Armin Laschet, when pushed by Die Welt on the topic, started to perform his own complicated dance. “We actually don’t know what emerges from the coalition negotiations,” he said. “But tax increases would be harmful at the moment. We have the highest tax revenues of all time,” he said, thus sticking to the party line. But rather than shutting up while he still could, he went on.
“Of course we have to be willing to compromise,” he explained. Aha! That c-word again. It turned faces bright red. People knew what was coming. “Otherwise we won’t be able to put together a coalition.” And that would lead to new elections. “No one wants new elections,” he said. “Voters would punish the party that would be held responsible for new elections.”
In other words, if Merkel stuck to her promise on taxes, the opposition parties would transform their cacophony into a harmonious choir and claim that her intransigence – not their demands – triggered these new elections. And she’d get clobbered. That’s the fear on the right. It’s to be avoided at all cost. If taxes have to be jacked up, so be it. It would be a fair price to pay to keep Merkel’s perch unchallenged.
Die Welt tried to pry some clarity out of him: tax increases are thus not excluded? “We’re definitely against it,” he said, but as he’d mentioned a minute earlier, they’d be willing to compromise.
Frazzled taxpayers who’d massively voted for the CDU/CSU to dodge the tax hikes proffered by the left had won on September 22. But three days later, they saw that they’d lose. Normally, campaign promises are broken over time, and lies are exposed only after months or years, but this one might enter into the book of speed records.
Meanwhile, Chancellor Merkel, smiling enigmatically – somewhere between triumphant and worried – is already thinking about how to keep the Eurozone duct-taped together and bail out its megabanks. And higher taxes in Germany may well be required to pay for her solutions.
Enjoy reading WOLF STREET and want to support it? Using ad blockers – I totally get why – but want to support the site? You can donate. I appreciate it immensely. Click on the beer and iced-tea mug to find out how:
Would you like to be notified via email when WOLF STREET publishes a new article? Sign up here.
Classic Metal Roofing Systems, our sponsor, manufactures beautiful metal shingles:
- A variety of resin-based finishes & colors
- Deep grooves for a high-end natural look
- Maintenance free – will not rust, crack, or rot
- Resists streaking and staining