Advisor to Finance Minister Lars Klingbeil, economist Jens Südekum, has indicated that tax increases may be necessary to address potential future shortfalls in the federal budget. In a commentary published by the “Handelsblatt” Südekum suggested reforms to inheritance tax and an increase in the top marginal and income tax rates for high earners as possible solutions.
Südekum’s rationale stems from concerns that previous tax rate reductions, if unaddressed, could disproportionately benefit even high-income individuals, including millionaires. He emphasized that relying solely on growth and investment initiatives, including those related to defense spending, would be an unsustainable strategy.
His analysis projects a budget deficit of approximately €30 billion (roughly $32.5 billion) in the core federal budget starting in 2027. Contributing factors include projected slower economic growth, rising social expenditures due to an aging population and additional financial burdens placed on the federal government through equalization payments to states and municipalities.
Südekum clarified that increased taxation of partnerships wouldn’t necessarily be a consequence, noting that these entities now have the option to switch to corporate tax, an area where recent tax relief measures were implemented. He stressed the vital importance of prioritizing economic growth, while acknowledging the need for a balanced approach to fiscal planning.