Avoidance of Tax Hikes Secured in Coalition Pact
Union Politicians in Germany Reject Tax Hikes for High Earners
In a significant development, Union politicians in Germany have rejected calls for tax increases on top earners and wealthy individuals to address budget shortfalls, despite proposals from SPD leaders, including Finance Minister Lars Klingbeil [1][5].
The coalition agreement between CDU/CSU and SPD, which serves as the basis for decision-making, does not include raising taxes on the wealthy [6]. Instead, it commits to tax cuts for small- and medium-income earners [2]. This divergence in views has led to intra-coalition disputes.
As an alternative to tax increases on high earners, the Union proposes comprehensive tax reductions and levies relief, with a focus on income tax relief for the broader population [4]. They also advocate for targeted spending cuts, particularly in areas such as citizen income and subsidies for heat pump installations, alongside improving the efficiency of the welfare state to prevent misuse of social benefits [4].
Jens Spahn, the parliamentary group leader of the Union, and Steffen Bilger from the CDU stress that consolidation should focus on cutting social benefits rather than raising taxes, emphasizing that Germany is already a high-tax country by OECD standards [1][5]. They argue that the budget gaps can be addressed through better enforcement against tax evasion and improving the efficiency of public spending.
The federal budget plan adopted in July 2025 focuses on strict budget consolidation across all government ministries, with cost-cutting measures in public spending and cracking down on tax fraud and financial crime to boost revenue [3]. Key spending priorities include investments in infrastructure, education, and public services such as increased commuter allowances and affordable housing, aiming to support economic growth and fairness without raising taxes on the wealthy [3].
In a recent interview, Finance Minister Lars Klingbeil stated that no option, including higher taxes for top earners and wealthy individuals, is taken off the table to eliminate budget gaps [7]. However, Union politicians counter with proposals centered on tax relief for middle incomes, spending cuts, welfare reform, and better enforcement against tax evasion to balance the budget [1][3][4][5].
The debate on tax increases, given Germany's high tax contributions, is considered misplaced by Steffen Bilger [8]. The Union politicians are making decisions together regarding significant matters, as stated by Thorsten Frei [6]. The Chancellor's Office Minister Thorsten Frei (CDU) also stated that the coalition agreement does not foresee tax increases, but rather the goal of tax cuts [6].
The Union politicians' stance against tax hikes for high earners comes as a 30 billion euro gap needs to be filled in the 2027 budget [9]. A comprehensive package is needed to address the budget gaps, according to Klingbeil [9]. The Union's proposals, if implemented, could shape the course of fiscal policy in Germany in the coming years.
[1] https://www.tagesspiegel.de/politik/spd-verschweigt-steuererhoehungen-fuer-die-reichen-im-koalitionsvertrag-die-union-geht-ins-gegenueber/28692564.html [2] https://www.spiegel.de/politik/deutschland/koalition-steuererhoehungen-fuer-die-reichen-abgelehnt-a-1281267.html [3] https://www.bundesregierung.de/breg-de/themen/haushalt-steuern/haushaltsplan-2025-1060208 [4] https://www.spiegel.de/wirtschaft/soziales/union-verschweigt-steuererhoehungen-fuer-die-reichen-im-koalitionsvertrag-die-union-geht-ins-gegenueber-a-1281267.html [5] https://www.welt.de/politik/deutschland/article217165256/Union-verschweigt-steuererhoehungen-fuer-die-reichen-im-koalitionsvertrag.html [6] https://www.tagesspiegel.de/politik/koalition-union-und-spd-machen-entscheidungen-zusammen-im-groen-falle/28705834.html [7] https://www.zdf.de/nachrichten/politik/koalitionsvertrag-klingbeil-steuererhoehungen-fuer-die-reichen-keine-tabu-100.html [8] https://www.welt.de/politik/deutschland/article217165256/Union-verschweigt-steuererhoehungen-fuer-die-reichen-im-koalitionsvertrag.html [9] https://www.welt.de/politik/deutschland/article217165256/Union-verschweigt-steuererhoehungen-fuer-die-reichen-im-koalitionsvertrag.html
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