Economist Jens Südekum asserts that implementing an income tax reform requires raising taxes on the highest earners to properly finance the changes. In a guest piece for the “Handelsblatt”, Südekum suggests that increasing tax rates for the wealthy is a “realistic option” and something that is “absolutely necessary” if the planned tax reductions are primarily intended for small and medium-income earners.
Speaking from his position as chief advisor to Federal Finance Minister Lars Klingbeil (SPD), Südekum grounds his proposal in the current strained budgetary situation. He warns that lowering income tax rates in the lower progressive brackets would inevitably lead to a drop in overall tax revenue. Furthermore, he stresses that relying solely on the anticipated growth effects generated by the reform would be insufficient to cover this funding gap.
He is also skeptical of broad calls for austerity measures. Südekum dismisses the idea that tax losses could be compensated simply by cutting subsidies or reducing administrative costs, calling such arguments unrealistic. He emphasizes that “savings are always concrete” noting that specific, additional proposals for expenditure cuts remain elusive at present.
Finally, Südekum refutes the argument that higher taxes on high-earning individuals would disproportionately impact sole proprietorships. He points out that these types of businesses already have the option to be taxed using a model similar to corporations and argues that the government could simply streamline this existing process.