Michael Hüther, director of the employer-affiliated Institute of the German Economy (IW), advised against implementing price caps on gasoline or increasing the commuting allowance as methods to support motorists. According to the “Rheinische Post” Hüther stated, “Price caps would diminish the incentives for improving efficiency in the use of fossil resources”. He further criticized the current system, saying, “The commuting allowance in income tax is certainly not an adequate or precisely targeted solution because its relief depends on the marginal tax rate through the reduction of taxable income and thus acts progressively”.
This position contrasts with recent suggestions from German Economy Minister Katherina Reiche (CDU), who proposed a higher commuting allowance, and SPD leader Lars Klingbeil, who suggested price capping. Instead, the IW director suggested alternative measures. He proposed, “It is possible to compensate lower-income households in a targeted manner with lump-sum amounts subject to income taxation, which would automatically grade the relief according to ability to pay”. Additionally, he suggested for recipients of citizen’s income benefits who are employed, that the mileage allowance could be raised.
Hüther argued that increasing the cost of imported resources would inevitably lead to a decline in living standards. He added, “Dampening the domestic prices paid for these resources would only be justifiable in the extreme case where the price increase is expected only for a very short time, as adjusting in such a scenario would not be economically efficient. However, we cannot assume this, given that production facilities in the Middle East have been destroyed and logistics systems are disrupted”.