A new study by the German Institute for Economic Research (DIW) suggests that the tax plans of the CDU, FDP and AfD would create significant holes in the state budget, which could not be closed even with stronger economic growth, according to a report by the “Handelsblatt” (Monday edition).
The study finds that the tax promises of the Union would increase the state deficit by 2.5 percent, while the plans of the FDP and AfD would raise it by over four percent. In contrast, the SPD’s proposals would lead to a reduction in tax revenues of 11.4 billion euros, while the plans of the FDP and AfD would result in a reduction of over 180 billion euros and the Union’s plans of 111 billion euros.
While the study notes that the tax cuts could lead to an increase in revenues due to economic growth, the DIW’s economist Stefan Bach said that the growth effects would only make up a quarter of the revenue losses. “Steeper tax cuts of the magnitude promised are utopian in the face of the tight budget situation” he stated.
Furthermore, the study finds that half of the tax cuts in the plans of the Union and FDP would go to the top 10 percent of earners, while only 11 percent would go to the lower half of the population. The SPD and the Greens, on the other hand, aim to relieve the lower and middle classes in a similar way, but in return, they would ask the high-income earners to contribute more. This is one of the reasons why their plans would lead to significantly smaller budget gaps.