Saturday, November 28, 2015

On the Subject of Taxes

For the 2017 German national election (in the fall of 2017 unless Merkel has to call early elections), the number two topic of the election after immigration/asylum-seekers is the anticipated end of the solidarity tax.

For those unfamilar with the tax....it was created back in the 1990s as a vehicle to pay for East Germany's infrastructure.  It was actually built with a end-point.  The method is after you figure up your taxes....they then use 5.5-percent of the total tax as an add-on to the final tax bill.  Example: if you had to pay 10,000 in taxes then 550 Euro would be whipped on top of that 10,000 and thus making the real bill 10,550.

I should note that if you were in the marginal income level, you won't meet the minimum of the tax, so it's a gradual tax.  I should also note that it affects capital gains as well.....so investors are hit to a degree.

It would end in 2019 unless the Bundestag does something to hinder the end.

So this week.....another comment or two was uttered by political players over the tax and it's life.

Bodo Ramelow (Thurigian top guy, and a Linke Party member) came out via an interview with the Frankfurter Allgemeine Zeitung and said it ought to continue on and be expanded to handle integration costs for the new immigrants.

Another major player, from the SPD Party, made a similar comment.

If you had to pick two really negative topics for a national election.....immigration and the solidarity tax would be on the list.  On the tax issue.....if you talk to working class people from the bottom of the middle-class....they don't care.  They aren't paying the tax and for the last two decades.....if they were living in eastern Germany.....they were enjoying a whole new infrastructure with roads, bridges, schools, and public buildings.

From the western side of Germany.....they saw nothing.  They got nothing out of the tax and these are the people who are most likely very negative in seeing it continue....in any form.

The people from the middle of the middle-class and on up?  None of them want the solidarity tax to continue......unless you drag out this integration cost item and you start talking refugees.  Sadly, if you were a government guy or political guy and then mention there is a great cost involved.....say fifteen billion Euro a year.....well, that gets people disturbed because they didn't think there was any real cost to this 'nice' slant on new immigrants.

The election talk for 2017 is still a full year away but this will be one of the top things that will be discussed.....with at least one party wanting the solidarity tax to dissolve away completely and at least one party wanting the tax to remain but be shifted over.

In some ways, they ought to refer to the solidarity tax as the "Zombie-tax" because they just can't kill it.  Billions of Euro arrive each year via the tax......they've conditioned the higher-income Germans to just accept it.....and they screwed up when they put an end onto the tax.

My prediction?  If it does survive.....it'll be a brief two to four year extension given to it and an absolute promise by some political party to dissolve it completely in the end.  I'm expecting the AfD Party to probably take a very negative view of the tax and want it dissolved on time in 2019.  Most of the other parties (SPD, Green, and Linke Party) will want it extended for another period.....maybe five years....maybe ten. The FDP Party is traditionally anti-taxation and probably will go for immediate ending.  And it's a big question mark over the Chancellor's party (CDU), with almost no one talking over the issue.

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