Currently, the top tax rate in Germany is 42%. In addition to professional footballers, many other taxpayers in Germany pay him. However, a tax rate of 45% applies to income exceeding EUR 274,613 (individual assessment as of 2021). However, this surcharge known as the rich tax could change in Germany in the future. This depends on the future government, which will also lead the tax fortunes of our country after the federal election in 2021. However, the focus on this tax rate alone is a little far removed from reality. In fact, many wealthy people are already paying significantly higher taxes. After all, both the solidarity surcharge and a possible church tax have not been considered. Furthermore, a trade tax overhang may also increase the income tax. At least the church tax can be claimed as a deductible special expense.

Germany uses different types of tax when collecting taxes. The most common is income tax, because it affects every taxpayer in Germany. And that basically applies to all residents in this country. But the taxation of income is related to the so-called performance. So if you have a higher income, you also pay proportionally more taxes. This principle of solidarity in the performance of taxation goes back to the Basic Law and thus to the founding fathers of our republic.

Now, however, we are writing the year 2021. In the meantime, the tax rates and calculation rules provided for by income tax law have changed several times. In addition, parties of all stripes continue to promote new plans and changes in tax rates before the upcoming federal elections. Same this summer. We want to take this as an opportunity to see which tax rates the parties that have good prospects for a Bundestag mandate are aiming for in the event of government participation. More specifically, we want to analyze here the effects that these changes have for wealthy people in Germany, i.e. all those who already pay a so-called rich tax. To better understand this, however, let’s first look at how income tax law currently handles taxation of high-earning taxpayers.

In order to base such an analysis on a solid foundation, we first want to briefly explain what the differentiation of tax rates for income tax in Germany looks like. However, we limit our view to the area that plays a role for wealthy people.

Until the basic allowance, all taxpayers are initially not subject to tax. For every euro above the basic allowance, a tax is then incurred. There are several stages. A fixed control rate is then used in the respective interval. These tax rates are therefore also called marginal tax rates. The lowest tax rate that applies to income just above the basic allowance is called input tax rate. At the other end of the scale, however, we are dealing with two different boundaries. One marginal tax rate is called the top tax rate. It amounts to 42% and taxes income over EUR 57,918 on individual investments.

So we can clear up an often reported misunderstanding, namely that the top tax rate applies to the entire taxable income. In fact, it only affects every additional euro of an income above EUR 57,918.

As a rule, the top tax rate is therefore the maximum rate for income tax. But since 2007 there has been a supplement that has an effect on particularly high incomes. It amounts to an additional 3% of taxable income if this exceeds EUR 274,613 for individual investments (as of 2021). This surcharge is called colloquially wealth tax.

However, this also provides for relief for certain types of income. They apply to income from agriculture and forestry, business operations and self-employment. For this purpose, an amount of relief is eligible. In addition, income from capital assets is excluded in principle. They are by no means regularly subject to the top tax rate, because a flat-rate capital gains tax with a tax rate of 25 % applies.

If you want to calculate which income tax and which solidarity surcharge you have to pay for a certain taxable income, you can use an online calculator from the Federal Ministry of Finance. However, the taxable income approach does not, of course, take into account any of the possibilities for reducing this amount (e.g. special expenses, exceptional charges) when calculating taxes.

However, we must also address one aspect that can influence the taxation of wealthy people in this country. This concerns the amount which is not included in the business tax, which individual entrepreneurs and fellow entrepreneurs have to pay, on income tax. Depending on which trade tax levy a municipality sets, it can happen that only a part of the trade tax according to § 35 EStG comes into question as a deduction from the income tax. The trade tax overhang is then the share that does not count towards the income tax. This overhang is of course also subject to the rich tax in Germany. Therefore, the actual tax burden on the wealthy is indirectly higher than the tax rate itself suggests.

Now we look at what the parties currently represented in the Bundestag, which in all probability will also be represented there in the coming parliamentary term, intend with regard to the wealth tax in Germany. We want to approach this objectively, because an opinion formation is beyond our intention. Rather, it is only about informing our readers about potential future taxes in this case. So, because we want to be objective, we go alphabetically here.

The project of the AfD with regard to the rich tax in Germany is limited to the abolition of the solidarity surcharge. This would reduce the overall tax burden by around 2,48 %. However, no other concrete changes are planned to the current handling of the rich tax in Germany by the AfD. This also applies to the level of the top tax rate.

It looks similar in the electoral programme presentation of the Union parties. Here, too, the abolition of the solidarity surcharge is the only element that should affect the rich tax in Germany.

The coalition parties together with the SPD have already decided that from 2021 the solidarity surcharge for 90% of the taxpayers affected so far will be eliminated. In the coming years, it should also be eliminated for all other taxpayers.

As for the top tax rate and the rich tax in Germany, the CDU/CSU are not planning any further changes.

The Greens, on the other hand, are in favour of introducing a new marginal tax rate, which should be above the current top tax rate. From an income of EUR 100,000 for individuals, a tax rate of 45 % should apply. Furthermore, from an income of EUR 250,000 for single persons, the applicable tax rate is 48 %.

The left also intends to raise tax rates for the upper income brackets. A wealth tax of 60% on income above EUR 260,533 is to apply in Germany. For income over EUR 1,000,000 even a tax rate of 75% should be decisive.

What is also relevant here is the capital gains tax. Because the left is planning to abolish the blanket tax. This would also make these incomes subject to regular income taxation. In this way, high capital incomes would also be taken into account in the rich tax in Germany.

On the other hand, the FDP’s election program looks completely different in terms of rich tax in Germany. Because the only change that the FDP wants in this case also concerns the abolition of the solidarity surcharge. But at the top tax rate, the FDP plans to raise the taxable income to EUR 90,000 for single people.

The SPD also does not want to make any significant changes to the wealth tax in the case of income tax for particularly wealthy people. Only the solidarity surcharge is to be phased out, as already decided with the CDU/CSU. But the SPD also wants a surcharge of 3% to the rich tax already applies from an income of EUR 250,000 for individuals.

Several parties point out in their current election programs that the share of taxpayers who have to pay the top tax rate on their income tax has risen sharply over the years. While various reasons may be cited to explain this phenomenon, this makes it all the more urgent for politicians to take a critical view when they claim tax justice for their policies.

Some may argue that the political determination of the tax base for income taxation has largely ignored actual inflation in Germany so far. Others may also point out with good reason that the proportionate increase in top taxpayers in Germany is also due to the fact that wealthy people in Germany have much easier to increase their wealth, which is usually attributed to a favored taxation. For this reason, contrary statements are also heard that the increasingly unequal distribution of wealth goes back, among other things, to the previous tax policy in Germany. As a result, the wealth tax has also come into the focus of several election programmes.

Whatever may be true of this, should definitely be taken into account in the future design of German tax policy. Presumably, it is even aspects of both argument points that play a role here. The essential question, however, is how we are to deal with it. Solidarity? Honest? Even patriotic? Or rather as an elbow company with its own advantage always in the foreground? Because this is also a legitimate reason, which is permissible in an election decision – however short-sighted it may be. But you may also agree that tax policy should always be rational.