On arriving home from Cardiff, the first thing I read in the SZ was that our Federal Minister of Finances, Wolfgang Schäuble plans to introduce a municipal income tax. Normally, I do not take any of the political propositions giving chase to each other seriously. Basically, that is a good idea. After all, a day or two later, nobody talks any more about propositions made with all their heart’s blood earlier.
This time, however, I sense that the municipal income tax might actually become reality. Because the municipalities were bled financially by what the Federal Government decided in favour of the state. At the same time, the local authorities have to bear more and more of the burden. So there is certainly a reason to change matters.
Consequently, I assume that Schäuble’s proposition has to be taken seriously and I start thinking about what it means.
I try to approach the affair with a positive attitude. At first sight, it does not sound too bad. It sounds a little like a Swiss model. The municipalities can decide by themselves what they want to earn, the citizens can react directly to the local authorities’ tax politics. Basically, I am always in favour of de-centralization and the subsidiary system.
On second thought, however, I start wondering. The Swiss tax legislation is totally different from the German one. Somehow or other, this new proposition does not fit. I spend more time thinking.
Didn’t the coalition start out by telling people they wanted a simpler tax system? Now there would be an additional tax, which does not sound like simplification to me. Two income taxes will certainly need more administrative care and more software than one. It will either have to be new de-centralized systems, or else central but multi-client systems. Mostly, this is rather expensive.
And how to deal with all the “small print” of our tax legislation? For example, what about the commuter tax relief? Will you have to assert your claim against the state or the municipality? And what about investment property you are renting to someone?
And how about those gangsters who have two places of residence? The only – cynical – solution that comes to mind is a permanent supervision of citizens by GPS. Perhaps Google can help?
And is there not another race between municipalities in the making – similar to the business tax? Incidentally, the idea to abolish it was based on exactly those reasons. One “super rich person” earning a few million Euros each year will make the local authorities richer when paying 2% than a hundred normal taxpayers who pay 20%.
I also read today that such a tax would have to be regulated on a regional level. Probably with application and approval procedures. That would again mean more bureaucracy. Or else, regulation has to be county-wide. In Bavaria, you would probably have to pay a few points more than in Mecklenburg-Vorpommern. Or maybe less, because you want the rich to settle here?
Tax policy is always also “control policy”. More often than not, the result is the opposite of what you had intended. The consequences are hard to foresee. Here is what I see as possible consequences:
- An increase of splinter development?
- People earning little will move to the cities?
- People earning a lot will populate the “fat belts” even more?
- Rich municipalities will prosper even more, poor ones will get even poorer?
Now we have two options.Either the second new income tax will come.
That will annoy me, because it would be the opposite of a tax reform in the sense of justice and simplification. Instead, it is a camouflaged tax increase. One that, again, means an advantage for those people who are willing and able to optimize their tax (along with some other things).
Or it will not come.
That will annoy me because of the thoughtlessness prevailing when such immature propositions, even on important topics, are made. In this instant, it was not just some politician talking rubbish, but the Minister of Finances in person, who, incidentally, is responsible for taxation.
Well, there is one consolation:
🙂 No matter if it will be a political one-night-stand or a really serious proposition, at least I activated my “grey cells” by thinking about the topic.
RMD
(Translated by EG)
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