The concentration of assets has been increasing for years. According to the French Star economist Thomas Piketty, wealth inequality in Germany is at the same level as in the imperial era.
The richest one percent owns about one third of total net assets. At 16%, almost half of these are accounted for by the richest 0.1% – trend: rising. Most of these assets consist of ownership of companies or shares in them. Half of the population, on the other hand, owns almost nothing.
Economic power generates political power and thus endangers democracy: the CDU’s Ahlen programme of 1947 calls for the " Prevention of the accumulation of economic forces in the hands of individuals, societies, private or public organisations, which could endanger economic or political freedom."
Corona is an accelerant for inequality
The corona crisis has further opened the gap between rich and poor. Some have lost their jobs or their business. Anyone looking for work remains unemployed. Your children will have lower chances in Germany, experience poorer education and be sick more often.
On the other hand, the billionaires and Multi-millionaires like the Quandts and Klattens celebrated a Corona Party with massive increases in wealth. While thousands of BMW employees were paid short-time work allowances, the BMW owners drew hundreds of millions of euros in dividends from BMW shares! And as a major shareholder, Knorr Bremse shareholder Thiele benefited from the Lufthansa rescue.
The wealthy in Germany mostly come from families that belong to the richest Germans before the Second World War. Ancestry thus determines life chances. But the Corona-crisis also creates new winners and losers. Like Jeff Bezos, the CEO of Amazon, or the largest shareholders of pharmaceutical companies that benefit from government subsidies for vaccines.
The new study by the management consultancy PricewaterhouseCoopers and the major Swiss bank UBS shows that since March 2019 alone, the wealth of the 119 dollar billionaires in Germany has increased by 20% to more than 594 billion dollars, despite the crisis until the end of July 2020. This Corona Party is not the result of performance, but of possession.
At the same time, public debt has increased massively. The credit ceiling of the debt brake was suspended in order to avert an even deeper economic slump, which destroys companies, jobs and also tax revenues. However, the debt in relation to economic strength as well as the interest costs of the federal government are far below the level of the financial crisis. Therefore, it would be possible to grow out of these debts in the long term.
THE LEFT wants to abolish the “debt brake” in favor of the Golden rule, according to which loans to the extent the investments are permitted. If, for example, the state builds a university that also benefits our grandchildren, it only makes sense that they also participate in the financing through interest and repayments. Climate change also requires massive government investment. In order to avoid extreme adaptation costs to global warming for our descendants, investments must not be limited to current tax revenues.
At present, the government even earns money by borrowing, because government bond yields are negative. However, this does not change the need for a wealth tax in order to finance permanently higher expenditure also for personnel and social benefits and to counteract inequality.
Nevertheless, the federal government wants to return to the debt brake after the Bundestag election. Then there is a threat of a cut in government spending or taxes will have to be increased. The Left faction in the Bundestag and the Rosa Luxemburg Foundation have therefore commissioned the German Institute for Economic Research (DIW) to calculate and evaluate various concepts of a one-off wealth tax for billionaires and multimillionaires (the richest 0.7% of adults). Such a levy is permissible in situations of particular burdens on public budgets and is already levied once after the Second World War under Chancellor Konrad Adenauer (CDU) as a burden compensation. The levy is distributed over 20 years, the revenues flow into the federal budget.
Germany needs the wealth tax for billionaires and multimillionaires!
Growing inequality is not a natural law. Thomas Piketty also makes this clear. In the post-war period, inequality declined. In addition to full employment with good wages, a strong welfare state, a reform of the income tax and a higher corporate tax, the left therefore advocates an appropriate taxation of inheritances as well as the revival of a permanent wealth tax.
The wealth tax is already an existing component of the German financial Constitution, but has not been levied since 1997. In order to correct the massive inequality, the wealth tax needs another impulse!
In order for the wealth tax to pay only the billionaires and multimillionaires, it needs high allowances for private and business net assets (assets minus debts). The allowance for operating assets should be significantly higher, because assets in the Form of machines and plants, for example, are firmly tied there. The assets are not simply in the account. However, the allowance must not be too high, because otherwise incentives will be increased to declare the Lamborghini to the company car (or the luxury villa to the company headquarters) in order to evade taxation.
There is currently a rule of thumb: the smaller the assets, the higher the share of financial assets. And the lower the returns that are achieved on these assets because of the low interest rate environment. The higher the assets, the higher the average returns. In addition, the study of the DIW on the wealth tax shows that a significant part of the tax revenue is realized at the top 0.1%.
Therefore, there is much in favour of a progressive (rising) tax curve. This means that those who have more also pay higher tax rates. In simple terms, one can assume that 1% property tax on business assets corresponds to about 10% additional profit taxation. In addition, of course, there are higher taxes for corporations and top earners in accordance with our tax concept.
There are various proposals for the wealth tax. The German trade union confederation (DGB) proposes a personal allowance of one million euros per person. This means that anyone with a net fortune of 1.1 million euros, for example, only has to pay the tax on 100,000 euros. The tax starts at 1% and rises to 2% for very large assets, which are due from a net asset value of one billion euros. The estimated revenue is 25 billion euros per year.
With his proposal for a wealth tax, the left-wing US Senator Bernie Sanders targets only the richest 0.1%. Sanders ' Plan provides for an exemption of US $ 16 million per person. Those who own less will be completely excluded from taxation. Starting at$ 16 million, the tax starts at a rate of 1% and increases gradually: from 2% for net assets between$ 25 and$125 million to 8% from $ 5 billion.
We propose a progressive rate with an allowance for private assets of one million euros per Person. Anyone who is a “paper millionaire” with a condominium in the city centre, for example, will not be charged. This is particularly important because of the development of property prices, which led to massive asset increases for homeowners, but which, unlike large real estate sharks, do not go hand in hand with high returns.
The allowance for operating assets could be five million euros. For this purpose, pension provision should be exempted from tax. The input tax rate starts at 1% and increases steadily up to a net asset value of 100 million euros. From 100 million euros, the maximum tax rate of 5% applies. This is appropriate because large assets yield particularly high returns. In addition, in the case of very large assets, a redistribution at the expense of asset substance is also required. The estimated revenues are then over 50 billion euros per year. In addition, the wealth tax of almost 20 billion euros annually.
Reduce inequality, strengthen States and municipalities financially
The revenue from the wealth tax would flow to the federal states in accordance with the Constitution. Especially there additional income is needed. Because States and municipalities, which are part of the states under state law, are responsible for the lion’s share of public services and public investments in our country. In order for states and municipalities to fulfil their public tasks, they need sufficient staff. For this, you need sufficient income to be able to hire enough staff and pay appropriately.
For the construction of new kindergartens and schools, the Expansion of care and public TRANSPORT, health, police, and legal protection (Courts, prisons), but also for the construction and tax administration in the future you need significantly more staff. This also means that states and municipalities need higher revenues. The additional national income from the wealth tax helps to close this gap. In addition, in contrast to income from income tax, sales tax and trade tax, income from wealth tax is not so much dependent on the economy. So they don’t break away when the economy is paralysed. This is important, because educators and nurses must be paid even if the economy is not buzzing!
If the ecological turnaround is to succeed, then the massive investment backlog must also be urgently reduced. According to Kreditanstalt für Wiederaufbau (KfW), the investment backlog in the municipalities alone amounts to a total of 147 billion euros. Germany needs an Offensive in public investments in education, health, energy, transport and digital infrastructure. Investments create jobs, attract private investment and create wealth for future generations through better infrastructure.
Polls show that a large majority of the population – supporters of all parties – supports the call for the introduction of a wealth tax. The more the wealth tax focuses on those who have billions and millions of assets, the more support it enjoys among the population!