The Union is now discussing an increase in taxes – or more precisely: the Top tax rate. It would be a breach not only of the pre-election but also the post-election promises of the CDU chairman and current Chancellor.

Suggestion: 49 instead of 42 percent top rate

The specific proposal, 49 instead of 42 percent top rate, comes from Marcel Fratzscher’s institute. The SPD has adopted his idea. And as if that weren’t enough tax increases: here comes the next tax increase proposal, this time directly from Fratzscher. The President of the German Institute for Economic Research is proposing a pincer grip on real estate assets, a double tax increase, so to speak, which would also increase automatically and permanently.

This is Fratzscher’s proposal, he sees it as an alternative to reintroducing a wealth tax (which is not at all up for debate): “A strong, regularly updated property tax and consistent taxation of increases in real estate value would generate stable income without triggering capital flight.”

Fratzscher writes this in a column he has in “Zeit”. His proposal should immediately make sense to the vast majority of Social Democrats. And those Christian Democrats who also see no other way out of the public sector’s financial misery than tax increases.

Merz about higher top tax rate: “There is no discussion for us”

Declared to be the top tax rate Friedrich Merz three weeks before the federal election this: “I’m not even thinking about agreeing with anyone on higher taxes for the so-called rich. There’s no discussion for us – the income tax is high enough.”

A DIW tax expert then made the suggestion of increasing the top tax in return for a flattening of the “middle class belly” of income tax – which has been discussed for years. That is exactly what the SPD wants. In the coalition agreement, the Union and the SPD agreed to reduce income taxes for lower and middle incomes. They did not agree on how to finance this measure. The SPD is now insisting on counter-financing in the upper segment for the tax cut in the middle and bottom of the tax table.

Union politicians rate the proposal positively

Two Union experts from the parliamentary group now rated the DIW and SPD proposal positively: Fritz Günzler and Florian Dorn. Both are experts, at least one is influential:

Güntzler, himself an auditor and therefore a real professional financial expert, told the “Handelsblatt” that this was “going in the right direction”. His parliamentary group colleague Florian Dorn from the CSU was generally positive. Dorn has a doctorate in economics and was personal advisor to Ifo President Clemens Fuest.

The Union leadership is currently trying to capture the topic, which is extremely dangerous for them. Parliamentary group vice-president Mathias Middelberg declared the statements of his colleagues in the Union to be “individual opinions” and called the 49 percent top rate unthinkable. Middelberg justified this by saying that “three quarters of our companies that are assessed according to income tax will then have to pay this top rate”. What is striking is that Middelberg only spoke of the 49 percent. The SPD originally brought 47 percent into play.

A salary increase is hardly worth it for top earners

The “strong shoulders have long been carrying more” – to use an SPD formulation. They even bear the lion’s share of the tax burden; the more they earn, the stronger this effect is. This is because the tax burden is not distributed evenly, i.e. linearly, but rather unevenly, i.e. progressively. Even with a linear distribution, higher earners would pay significantly higher taxes than lower earners, but in proportion to their income. And not disproportionately.

The more someone earns in Germany, the less every euro they earn more is worth. With a top rate of 49 percent, of every gross salary increase of 100 euros, only 51 euros net remained. Social security contributions are added. It would be the same with any promotion, for example from a team leader to a department head in the company – it pays less and less after taxes.

Bärbel Bas, SPD co-chair and labor minister, has suggested using capital gains to finance social insurance. This would also increase social security contributions for high earners who have put money aside for old age. This also applies to skilled workers, especially to those who have gone on to have a career with good training – and become entrepreneurs, for example.

Bas had recently insulted entrepreneurs as “gentlemen in comfortable armchairs, one or the other in tailor-made suits”.

Debate at an explosive time

For the Union, the debate about the top tax rate, which it has now fueled, is politically explosive. For two reasons: Rhineland-Palatinate will vote next Sunday, it looks like a neck-and-neck race. The second reason refers to another election promise from the Union. Namely to save money in the household.

But that hasn’t worked impressively recently with citizens’ money. Of the 30 billion savings promised by current Chancellery Minister Thorsten Frei, less than a billion remained when it was passed in the Bundestag.

The peak tax signal means: Anyone who wants to talk about higher taxes certainly no longer wants to talk about savings.

At the most recent CDU party conference, point one was: “Performance must be worth it again.”