Closing the Justice Gaps in the German Tax System: A Call for Reform
- From Xhulia Likaj
- Reading duration 2 min
Germany prides itself on its commitment to social solidarity and equitable distribution of wealth through its tax and social welfare systems. Yet, beneath this veneer of fairness lies a stark reality: significant loopholes that favor the wealthy. Despite consistently ranking among the top countries in Oxfam's "Commitment to Reducing Inequality Index," Germany's tax system disproportionately burdens wage earners while providing significant tax breaks for the super-rich and big corporations. This is what results from the third edition of the Tax Justice Yearbook from Netzwerk Steuergerechtigkeit.
The heart of the issue lies in the under-taxation of large fortunes, inheritances, and capital gains. While ordinary workers face high tax rates, the ultra-wealthy enjoy remarkably lower rates on their wealth-derived incomes. This stark contrast is exemplified by the fact that a typical millionaire pays just half the tax rate of an average earner and even less for those who derive income from lucrative assets like real estate or corporate profits.
Over the past three decades, successive tax policies have contributed to this growing wealth inequality. Measures such as the suspension of the wealth tax, reductions in corporate taxes, and cuts to the top income tax rate have disproportionately favored the wealthy elite, leading to a near tripling of billionaire wealth in Germany over the past decade alone.
Proposed reforms offer a balanced approach to ensure a fairer tax system without unduly burdening the middle class or small businesses. By targeting only a few hundred large corporations and a handful of super-rich families, these reforms could generate an additional €75 billion in revenue.
These additional funds could be channeled towards targeted relief measures, addressing pressing issues such as climate change, demographic shifts, and historical inequalities. However, achieving these reforms will require a paradigm shift in political will and a concerted effort to challenge the influence of entrenched wealth and power.