New socially graded solos: LBBW chief economist calls for tax increases for the rich

New socially tiered solos
LBBW chief economist calls for tax increases for the rich

In order to get the effects of the Ukraine war and climate change under control, Moritz Kraemer believes that Germany should increase taxes. The chief economist at Landesbank Baden-Württemberg (LBBW) has a new income-related solidarity surcharge in mind.

According to the chief economist of the largest German state bank, the federal government must increase taxes because of the enormous challenges posed by the Ukraine war and climate change. “I advocate the reintroduction of the solidarity surcharge,” said Moritz Kraemer, chief economist at Landesbank Baden-Württemberg (LBBW). “The turning point does not come for free.”

Most recently, after German reunification, the country had such “Herculean tasks” ahead of it. Politicians must push ahead with the energy transition in order to become independent of Russian gas. According to Kraemer, one must expect that the economic crisis will worsen as a result of the sanctions against Russia, which could necessitate further aid packages for companies, employees and consumers.

In addition to higher spending on defense, there is no way around putting more money into roads, railways and schools, according to Kraemer. “There are so many necessities, now all at once. They all arose because our generation did not act properly and delayed answers to many of the societal challenges.”

Tax increases should primarily hit the richer

The solos must be socially staggered, says Kraemer. “We mustn’t dig into the pockets of the small earners, who have lost purchasing power anyway.” The tax increase should primarily hit the richer. “That must then also be borne by those who have benefited from all the rising real estate values ​​and stocks. These are not the average earners,” explained the chief economist.

The soli has been levied since 1995 to cover the costs of German unity, most recently it was 5.5 percent of income and corporation tax. Last year, the surcharge was abolished for around 90 percent of citizens.

Kraemer considers such a tax increase to be the best way, which will not be at the expense of future generations. In addition, the tax rate in Germany is still very moderate in an international comparison. The federal government could theoretically cover the necessary expenses with new loans, since it is solvent and can borrow at very low interest rates. But: “The debt brake is in the Basic Law, we can’t do anything about it.” There is also no majority for changing them.

Cutting expenses on a large scale also makes no sense. “Are we going to cut welfare now that inflation is at 7 percent?” There should also be no savings when investing in infrastructure. Kraemer said he was aware that it was very important to the FDP that a tax increase was excluded in the traffic light coalition agreement. However, the chief economist is certain that things cannot stay that way.

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