Disagreements are emerging within Germany’s governing coalition over future tax policy, potentially creating a significant point of contention between the Social Democratic Party (SPD) and the Christian Democratic Union (CDU).
Federal Finance Minister Lars Klingbeil recently suggested the possibility of tax increases amid growing concerns about budgetary gaps, prompting strong opposition from the CDU. Mathias Middelberg, deputy chairman of the CDU/CSU parliamentary group, stated that raising taxes or duties is “generally not a sensible option” arguing the country faces an “expenditure problem” rather than a revenue shortfall. He emphasized the need for “structural reforms and savings” to address the situation.
The SPD, however, has defended Klingbeil’s openness to considering tax adjustments, citing concerns regarding escalating budgetary deficits and growing wealth inequality. Wiebke Esdar, deputy chairwoman of the SPD parliamentary group, argued that a discussion is necessary regarding how “particularly high assets and inheritances” could contribute more to the common good. Esdar specifically mentioned potential tax increases for the wealthiest individuals as a matter of “justice” a topic she indicated would be addressed in discussions with the CDU.
Economists adhering to the Ordoliberal school of thought have voiced skepticism regarding any tax increases, cautioning that such measures would negatively impact economic growth. Clemens Fuest, president of the Ifo Institute, noted that the state’s share of economic output has already significantly increased since 2019, currently standing at nearly 50 percent, a situation that supports limiting spending rather than raising taxes.
Financial scientist Thiess Büttner echoed this sentiment, arguing that given Germany’s already high tax and duty burdens internationally, consolidation and the promotion of growth through structural reforms should be prioritized.
Lars Feld, a former economic advisor and previously a consultant to former Finance Minister Christian Lindner, also believes sufficient opportunities exist for spending cuts. He stated that with a state share of economic output exceeding 50 percent, there is ample room to maneuver on the expenditure side, requiring only the political will to consolidate.