Taxes

SPD

Discussion of Germany's Value Added Tax is making waves this election campaign. The SPD believes raising the VAT would be a "step in the wrong direction," but the party's official platform does not reject hiking the consumption tax outright. The Social Democrats are pushing a "wealth tax" on yearly income over 250,000 euros. That would raise the top tax rate to 45 percent from the current 42 percent. The party hasn't delved into specifics for its plans for corporate taxes, however, the SPD has said its goal would be to eventually tax both publicly and privately held firms at the same rate. Tax rates for publicly traded companies could be cut from 25 percent to 19 percent, but the SPD has not explained how it would finance such a reduction. Bills up to 600 euros for tradesmen such as carpenters or plumbers for private households could also be deducted from income taxes in the next two years.

CDU/CSU

CDU and CSU want to increase the VAT from 16 to 18 percent from 01-01-2006 in order to lower non-wage labor costs. The lowest bracket for income taxes would be cut from 15 to 12 percent and the top rate would decrease from 42 to 39 percent. The conservatives would keep a local business tax know as Gewerbesteuer, but corporate taxes would drop from 25 to 22 percent. To offset those cuts, tax loopholes and subsidies would be shut including tax breaks for commuters and wages earned on Sunday, holidays and nights. Inheritance taxes on family-run companies would be scrapped if the firm continues operation under the heirs for the following 10 years. The Union wants to introduce a tax-free income amount of 8,000 euros for all individuals, including children which could be used by their parents. The conservatives have not yet determined if there would be changes to the Kindergeld money Germans receive to help support children.

The Greens

The Greens oppose raising the VAT, but back eliminating tax breaks including subsidies for agriculture and coalmining. The party supports low taxes for the middle class, but wants the rich to pay more. How much more has not yet been decided, however. The Greens also propose implementing a wealth tax on private assets. Taxation for companies and individuals would remain differentiated and corporate tax revenues would be stabilized by increasing the base for minimum tax. The Greens want to change the business tax Gewerbesteuer into a communal economic tax that would take more account of income from interest, rent and leasing. The environmental tax Ökosteuer would not be increased.

FDP

The FDP is against raising the VAT. Instead the market-oriented party want to introduce a three-step income tax model with rates of 15, 25 and 35 percent. The tax-free income amount would be 7,700 euros. The FDP would also revamp corporate taxes with a top bracket of 25 percent and the municipal business tax, Gewerbesteuer, would be scrapped. To replace the loss in tax revenue, local governments would receive a larger portion of the sales tax and there would be surcharges on income and corporate taxes. Over the long-term, the FDP proposes introducing a flat-tax system.

The Left Party

The leftists would leave the VAT at 16 percent, but would cut it to only 7 percent on purchases of medicine and work done by the trades, such as plumbers or electricians. The Left Party would leave the lowest income tax bracket at 15 percent but it would increase the tax-free allowance to 12,000 euros per year. The top tax rate would be increased to 50 percent on all annual income over 60,000 euros. The party would also introduce a wealth tax for people with yearly income over 300,000 euros and would reintroduce a sales tax for stock market transactions. Like the Greens, the Left Party would change the business tax Gewerbesteuer into a communal economic tax that would take more account of income from interest, rent and leasing. In order to sink non-wage labor costs, the Left Party would no longer have companies pay into the social security system according to the amount of employees they have, but would rather measure how much the firms contribute to the economy.