Discussions regarding a tax reform between the CDU/CSU Union and the SPD have gained momentum. According to a report from the CDU’s faction, tax policymakers Yannick Bury and Florian Dorn developed a concept designed to provide an overall relief of between 25 and 30 billion euros annually for all taxpayers. Their plan suggests covering the cost through measures such as reducing various subsidies.
In a guest article for the “Handelsblatt”, the two CDU parliament members stated their proposal was to reform the tax rate progression, thereby reducing taxes for all incomes, with a particularly high relative relief for small and medium incomes. Their concept includes raising the basic tax-free allowance by at least 1,000 euros. Furthermore, the top marginal tax rate of 42 percent would only apply to taxable incomes starting from 85,000 euros, an increase compared to the current threshold of around 70,000 euros. The solidarity surcharge would be eliminated for everyone. The so-called wealthy tax rate would increase from 45 to 47.5 percent, taking effect at a taxable income of 210,000 euros, up from the previous 277,826 euros.
Despite these changes, the top earners would ultimately see some relief, partly due to the discontinuation of the solidaritätszuschlag (Solidarity Surcharge). Dorn commented that tweaking the tax rate in the upper brackets would only be possible if the Solidarity Surcharge was scrapped, thereby relieving all taxpayers. Bury added that “we do not need to burden anyone more in order to relieve others”.
Bury and Dorn propose to finance the potential tax losses of up to 30 billion euros by cutting subsidies and implementing sustained savings within the federal administration. They suggest that federal financial aid should be reduced by 15 percent each year over three years, following the “lawnmower method”. This reduction, they estimate, would free up 22 billion euros. Additionally, they aim to save nearly eight billion euros annually through reductions in administrative costs.