In discussions surrounding comprehensive tax reform, German Chancellor Friedrich Merz (CDU) has indicated his willingness to consider raising the top income tax rate. The move would be feasible if it includes smoothing the tax brackets in the upper range and abolishing the solidarity surcharge, Merz told Spiegel magazine in comments published Wednesday.
He emphasized that this step will eventually need to happen regardless. "We should do it before the Federal Constitutional Court forces us to," he stated.
Merz referenced a proposal put forward by two Union parliamentary members that includes raising the so-called wealth tax rate on income tax from 45 percent to 47.5 percent. Under this proposal, the solidarity surcharge would be completely eliminated. Additionally, the top tax rate would apply at a higher income threshold. The plan also calls for across-the-board cuts to government subsidies to achieve savings.
The coalition government has announced tax reform for the coming year. The Social Democratic Party (SPD) has criticized the Union's proposals, with the Finance Ministry planning to present its own alternative framework. The ministry insists that any income tax reform must primarily provide relief to low and middle-income earners.
Merz called on his governing coalition to present a more unified and convincing front to the public. "When three coalition partners struggle with strained expressions to reach common positions, and the public sees how difficult it is for us, you cannot expect that same public to be enthusiastic about us," the Chancellor told Spiegel. "We must be convinced of ourselves and communicate that conviction outwardly."
The Chancellor acknowledged that there have been "differences of opinion between individual cabinet members" recently. He noted that there are "pairings that work excellently" and others "that represent the different origins of our parties." Among the latter, he specifically mentioned Economics Minister Katherina Reiche (CDU) and Finance Minister Lars Klingbeil (SPD).
"But even those two are finding common ground," Merz added. The two ministers recently clashed over solutions to the energy price crisis.
Looking ahead to major reforms, Merz urged German citizens to remain open to change. "We cannot simply continue as we have for the past 20 years," he told the news magazine. He accepts that such statements may draw criticism. "But I have taken an oath of office, and I have a conscience. Both obligate me." While he acknowledged he could perhaps frame things more pleasantly or say them more kindly, he stressed that "the situation is so challenging that I will not shy away from it."
Beyond income tax reform, the government faces a series of major legislative initiatives. These include pension reform and overhauling the statutory health insurance system, both critical areas requiring comprehensive policy changes in the coming months.
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