;Resize=(1200,627)&impolicy=perceptual&quality=mediumHigh&hash=57c605c79479547d6d45ac5818c338dc120bca98a3ca055caf005e09a467233e "Ten point plan: What the Union would do for you as a taxpayer")
Ten point plan: What the Union would do for you as a taxpayer
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There is no genetic engineering in the plant
But don’t worry: they’re genetically modified
With a ten-point plan, the CDU has presented a new strategy paper with concrete legislative proposals. This is intended to relieve the lower and middle classes, but most of the proposals benefit those who are already wealthy.
In just under 100 days there will be elections in Hesse and Bavaria and the Union wants to retain its majority in both federal states. Although the poll numbers for the CDU and CSU have recently increased slightly, the elections are far from being won. This is one of the reasons why the Union presented last week a new strategy paper. It lists ten projects that both parties would implement after the next federal election. They should make the differences to the current traffic light coalition clear, although the state governments in Bavaria and Hesse could not implement any of the ten points.
Many of the ten points deal with issues that only indirectly affect your wallet, such as new regulations for migration and a different security and crime policy. Others, however, are about a reorientation of social and economic policy and thus directly about how much money you can get or keep in the future and how much tax you have to pay. CDU boss Friedrich Merz and CSU boss Markus Söder boast that the ten-point program is a “relief offensive” with “broad tax and duty relief for low and normal earners”. More performance should be worth more. But a closer look at the projects shows that low and normal earners are not the target group for the CDU and CSU. Instead, it’s about making those who already have a lot of money even richer. Here are the key claims in the analysis:
1. The parental home should be inherited tax-free
Was plant die Union? Conservatives argue that home ownership is the best retirement plan. For this reason, inheritance tax should be abolished if parents pass it on to their children.
Who uses that? Parental houses can already be inherited tax-free if the children continue to live in them for at least ten years. Otherwise inheritance tax will be due. But since children enjoy an allowance of 400,000 euros, they only have to pay taxes on more expensive properties. If several children inherit a house, the allowances can even be added up. So two children get a property of up to 800,000 euros tax-free.
Inheritances that exceed this exemption are very rare in Germany. Only 16 percent of inheritances have a value of more than 100,000 euros. Only the few heirs who receive real estate from their parents with a value of more than 400,000 euros would benefit from the CDU plans. So this only affects the wealthiest families in Germany, less than a sixth of the population – and certainly not low and normal earners.
2. Overtime should be tax-free
Was plant die Union? CDU and CSU want to set “incentives for overtime” so that more work is more worthwhile. The plan is that overtime will no longer be taxed. Then only social security contributions would be due. According to Merz and Söder, the employees would have more net in their pockets. Among other things, this is intended to prevent people from having to take on a second job to make ends meet. Instead, they should work more in their main job.
Who uses that? In theory, anyone who works overtime can benefit from this rule. All you have to do is have a job where overtime can be done sensibly and where your boss is willing to pay for it. A bakery will not stay up two hours longer in the evening because an employee wants to work overtime. But that should be possible in most professions.
But just because everyone can theoretically benefit from it, doesn’t mean everyone will. Statistically, overtime is unequally distributed in Germany. Around a third of Germans work almost no overtime, while another almost third work a maximum of ten hours a week. That made one annual survey of the HR consultancy Haufe for 2021. In addition, 80 percent of the overtime is not paid, but compensated by free time. That would be cheaper for an employer than paying for it, even with the change to Union plans. Only 18 percent of overtime is paid.
That 18 percent is mostly done by people in well-paying jobs. So did 2019 – the numbers from before the corona pandemic are more meaningful today – 84 percent of managers work overtime, but only around 50 percent of all employees. In addition, the number of overtime hours increases with salary. People with an annual income of up to 20,000 euros only work 1.9 hours of overtime per week, those who earn 40,000 to 50,000 euros work an extra 2.88 hours on average and people with an annual income of more than 120,000 euros even work 19.53 hours. So people with high incomes would benefit much more from the Union plans than people with low incomes.
3. The real estate transfer tax on the first owner-occupied property is to be abolished
Was plant die Union? If you buy land or real estate, you have to pay real estate transfer tax. The tax is collected by the states, which is why each state has a different tax rate. These are currently between 3.5 and 6.5 percent of the purchase price. For the first, owner-occupied property, the Union wants to cancel these costs in the future.
Who uses that? The real estate transfer tax makes when building a house or house purchase a not inconsiderable part of the costs. With a purchase price of 250,000 euros, it is between 8,750 and 16,250 euros depending on the federal state, with 500,000 euros it is between 17,500 and 32,500 euros. Saving this money could actually help home buyers start their own home.
Only: real estate and land are expensive. They cannot afford low earners with or without real estate transfer tax. For many average earners, this may still be possible in the country, but usually not in big cities. Those who build or buy owner-occupied real estate today are those who already belong to the higher or top earners – they would mainly be relieved by the Union.
4. Electricity tax should be reduced to the minimum permitted by the EU
Was plant die Union? The Union wants – as the FDP suggested earlier in the year – to reduce the electricity tax to combat high energy prices in Germany. It should only amount to the minimum specified by the EU. This is primarily intended to relieve companies.
Who uses that? The electricity tax is certainly one of the least noticed taxes in Germany, so we first have to explain what it is all about. The electricity tax was introduced in 1999 by the then red-green federal government. She had two intentions: firstly, electricity consumption should be reduced through higher prices, secondly, the income from the electricity tax will flow almost exclusively into the pension fund. With the introduction of the tax, the pension contributions were therefore reduced from 10.15 percent back then to 9.3 percent today. The electricity tax itself was last increased in 2003. Since then, it has remained constant at 2.05 cents per kilowatt hour. With an electricity price of currently around 40 cents per kWh, it makes up around 5 percent of the electricity price. Most manufacturing companies in Germany are already getting discounts and only pay around 1.5 cents per kWh, many can also be completely exempt from the tax. In addition, it does not apply to electricity from renewable energies.
The EU also agreed in 2003 that there should be an electricity tax in every country. The amount is left to each state to prevent a competition to the bottom, but minimum dimensions have been set. Consumers will therefore have to pay at least 1.0 cents per kWh, and companies will have to pay at least 0.5 cents per kWh.
The biggest beneficiaries of an electricity tax reduction would therefore not be the consumers. For them, prices fell just 1.05 cents per kWh, or about 2.5 percent. Companies that use a lot of electricity from fossil sources would save the most – but whether these industries in particular should be subsidized in times of climate change is more of a moral question.
But even among consumers, it is once again not the low and average earners who will benefit most from the Union plans. According to a 2019 study by the Institute for Interdisciplinary Research in Heidelberg, per capita energy consumption increases with income. People with the highest incomes in Germany use 50 percent more electricity than those with the lowest incomes. Accordingly, they would also receive the greatest relief from a reduction in electricity tax. However, since excise taxes burden low earners more than top earners, the reduction relative to income would also benefit them.
But: As I said, 90 percent of the electricity tax revenue goes into the pension fund. If these billions of euros are missing in the future as a result of the CDU/CSU plans, they must be compensated for elsewhere. However, since the Union rejects any tax increase for companies in its ten-point paper, this can only be done through taxes that private citizens pay.
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