“Taxes are a legal case of robbery”.
No, it wasn’t some heartless neoliberal who said that. This is what the church teacher Thomas Aquinas wrote
(1224–1274) eight hundred years ago. Which is also true: every community is forced to take money from its citizens, whether they want it or not. Because without taxes there can be no state. The only question is how brutally the “robber state” strikes.
In Germany, the state is a voracious predator, more greedy than its peers in many other states. The tax rate, i.e. the share of taxes in total economic output, rose to 24.5 percent in 2022 – a new high. This means that the state claims a quarter of the gross domestic product for itself. In 1991, the first year after reunification, this rate was still 22.0 percent. This does not even include the high social security contributions.
Tensions over tax increases
Despite this, politicians from left to far left – the Greens, SPD and Left Party – are constantly calling for higher taxes. There is no problem that, from their point of view, cannot be solved with higher tax rates or a new wealth tax. This leads to severe tensions in the traffic light coalition. The battle situation is: red-green against FDP.
Federal Finance Minister Christian Lindner and the FDP are stubbornly refusing to turn the tax screw or lift the debt brake. With good reason: Both were prerequisites for a coalition of the Free Democrats with the two left-wing parties SPD and Greens. However, the Red and Green ministers’ spending aspirations are much higher than what can be funded without raising taxes or even increasing debt. For this reason, the Minister of Finance has not yet presented the benchmark figures for the 2024 federal budget.
Lindner is right about one thing
For Lindner, it is not just a matter of the FDP standing by their promises in terms of financial policy, especially if the party cannot afford to “fall over”. But on this point, Lindner is absolutely right. His statement that “the state doesn’t have an income problem, we have a massive spending problem” can be backed up with figures.
In fact, the German treasury cannot complain about too few trickling tax sources. In 1991, in the first year after reunification, tax revenue, i.e. the sum of all tax revenue from the federal, state and local governments, amounted to 338 billion euros. In 2022, this sum had risen to 888 billion euros. That is an increase of 550 billion euros or 163 percent. Which in turn corresponds to an average annual increase of a good 3.5 percent. Since the inflation rate was almost always below 3 percent and in some cases even far below in these 31 years, the finance ministers and chamberlains had more in real terms year after year.
Now, tax revenues have not increased evenly over three decades. Because of the financial crisis, they remained well below the 2008 level in 2009 and 2010. In 2020, in the first year of Corona, the tax offices took less than in the previous year. However, our tax system is like a machine that spits out more and more money as long as the economy grows even a little bit. An increase of 163 percent in 31 years! If that isn’t proof of ample tax revenue, then what is?
Treasury benefits disproportionately with every salary increase
The wage and income tax, which accounts for a good third of the tax revenue, makes a decisive contribution to ever-increasing tax revenues. Because the tax rate increases progressively with increasing income, the tax authorities benefit disproportionately from every salary increase. In addition, more and more employees are burdened with the maximum tax rate of 42 percent, an additional 150,000 per year.
In 2000, only 1.6 million taxpayers or jointly assessed couples had to pay the maximum rate, so in 2018 it was around three million according to the federal government (more recent official information is not available). In the meantime, there are likely to be more than 3.5 million, almost nine percent of all income taxpayers. Incidentally, these nine percent pay more than 50 percent of the total revenue from wage and income tax.
Even supporters of tax increases benefit from Lindner’s hard line
Yes, taxes are a legal case of “robbery.” But the state’s right to ask its citizens to pay does not absolve it from the obligation to be careful with taxpayers’ money. Calling for even higher taxes is very easy for many politicians, but combing through the spending side is much more difficult.
But oddly enough, calls for tax increases get more acclaim than calls for reduced government spending or the abolition of subsidies. This is due to the fact that very many do not know that, from a tax point of view, they themselves are among the “rich” who, from the left-green perspective, should be fleeced more.
If the SPD and the Greens governed alone, these citizens would feel it in their own wallets. Even the supporters of tax increases benefit from the fact that Finance Minister Lindner remains firm. Because one thing is for sure: tax revenues are rising and rising – even without any increase.
