Monday, November 24, 2014

Talking the Solidarity Tax

Here in Germany, we have a special tax called the Solidarity Tax.  It came up on the list of topics today for an odd reason.

After the wall came down (1989)....there was an urgent need for more capital for Germany to rebuild the eastern part of the country.  So, the Solidarity Tax was invented.  Up to 1,922 Euro a year for a married couple working was the breaking point where you didn't have to worry about the Solidarity Tax.  After that annual tax base, if you made paid the Solidarity Tax, and it was on a increasing volume.  As you made more, you paid more.  The max was 5.5-percent.

An example of this....after your bill was figured up and you owed 10,000 Euro for your annual tax situation (both you and the wife).....then the government tossed 550 Euro more onto the situation (10,550 Euro total now).

The original goal was to run this for a definite period.  Well....that period comes up for review in 2019.

The use of the pot of money?  This has become a topic that political figures now chat about, and would like to use in different ways......besides pushing the money toward the eastern parts of Germany.  Is the east still behind?  Some would argue about this, but if you rode around on the various streets, roads and bridges.....I think you'd come to agree that they are finally at the same level as the western part of Germany.

The CDU position?  They'd like to just take down the tax entirely.....handing the money back to business operations and private citizens.

The Greens and SPD?  Today, they came out and said that they'd like to continue the tax, but now refocus the money around the sixteen states.

Does it matter?  From 1998 to 2009 (11 years), it added up to about a 100 billion-plus Euro.  You can imagine two scenarios.  One is where sixteen German states get the 100 billion-plus over ten build roads, schools, bridges, concert halls, and monuments.  The other is where the German private consumer and business operations get the money back to themselves and spend it on the economy (new cars, new houses, vacations, boob-jobs, investment money, retirement funds, etc).

For 2015 and 2016, I don't see it being more than a topic brought up three or four times a year.  For the 2017 election?  It'll become one of the three biggest topics of the campaign.  For the small guy who doesn't pay much in taxes, this won't amount to much personally, and they would prefer to see the money go toward their individual states.  For higher wage earners and corporations?  They'd probably prefer to see the money in their hands.  To be honest.....the little guy really isn't contributing much into this pot and probably shouldn't have much to say.  But the reality here is that politics makes it an across-the-board mess for the public to sort out.

So, when you hear about the Solidarity's a lot of cash that will come to exist in a different form in less than five years.  It might be a curious topic to hear about.

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