Monday, September 7, 2015

The Solidarity Tax Story

Two decades ago, Germany made a decision after the wall came support the rebuilding of East German infrastructure with a solidarity tax.  At the time, it was a difficult pill for most Germans to accept but most of the political parties jumped into the middle and gave it support.  The solidarity tax had one unique end-point....2019.

There was this discussion last year by the German Finance Minister over the anticipated end, and generally....he gave the reasons why it's time to let it end.....letting the money flow back to the public.  In an amusing way....several of the political parties came to the defense of the solidarity tax, and would prefer that it continue.  Some gave special interest areas where the money should flow into....some just said it ought to be infrastructure projects over the whole of Germany.

Today, the solidarity tax got brought up again.

The Prime Minister of Thuringia, Bodo Ramelow, said that the money....which amounts to roughly fifteen billion Euro a year.....ought to now be used for refugee support.

A shocker?  I would imagine that most Germans really don't expect the solidarity tax to ever disappear.  No one can cite any tax in Germany.....which evaporated or disappeared.

Why the sum of fifteen billion might matter?  Well....there's going to be massive construction costs laid out somewhere in this situation because there really isn't a huge number of empty apartments sitting around in prime cities like Frankfurt, Hamburg, or such.  So, if the numbers continued.....say one million for 2015, and another million for 2016....there's a massive need for housing.

The use of the solidarity tax for the 2017 election as a major topic?  I'm guessing that some people will say they'd prefer the tax to drift away, and another group will say that the solidarity tax isn't a problem and should remain.

If you look at the structure of the solidarity tax....for low-wage's not much of a problem.  It starts to be an issue for mid-income wage-earners, and a hefty issue for larger income folks.  I think the voting public would probably agree to some period added onto this....maybe another three years.  But I doubt if anyone agrees it needs to be a permanent tax.

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