Overview
- Economist Stefan Bach of DIW proposes lifting the top rate to 49%, raising the threshold for that rate to about €90,000 taxable income, abolishing the solidarity surcharge for all, merging two tariff zones, increasing the entry rate to 19%, and slightly lifting the basic allowance.
- DIW estimates the reform would deliver about €20.3 billion in annual relief, with higher taxes on roughly the top 2% bringing in about €5.9 billion and leaving a gap of around €14.4 billion to cover.
- Suggested options to close the gap include spending cuts, higher value-added tax, or reviving a wealth tax, with no decisions taken and distributional effects flagged as sensitive.
- Modeling cited in the plan indicates most low and middle earners would pay less, while tax burdens would rise above roughly €150,000 in gross annual income.
- Separately, the German Taxpayers’ Association proposes a 48% rate only on taxable incomes above €1 million while easing taxes below that level, and it warns that other ideas risk raising burdens on small and mid-sized firms.