The upcoming 2025 German federal election promises to be dominated by economic issues, with key parties outlining divergent strategies revolving around taxation and social welfare reforms. Amid rising economic pressures and public scrutiny, the political scene is heating up as parties present their plans to restore growth and address public concerns.
According to Tobias Hentze, head of state and tax policy at the Institute of the German Economy, the central question for parties is clear: "How do we regain economic dynamism for improved growth rates?" Hentze emphasizes the necessity for policies addressing taxes, investment incentives, and bonuses.
Both the CDU/CSU and the FDP have made significant tax relief proposals aimed at energizing the economy. The Union's plans include limiting corporate taxes to 25% and completely eliminating the solidarity surcharge, alongside reducing the value-added tax rate on food service from 19% to 7%. Collectively, such measures, dubbed "Turboabschreibungen," are intended to stimulate rapid growth by increasing corporate liquidity. Hentze estimates these reductions could provide businesses with around €20 billion of relief.
Further, the Union posits the necessity of reducing the progressive income tax threshold, advocating for adjustments so the top tax rate will apply only to those with earnings above €80,000, as opposed to the current €68,000. This, Hentze elucidates, could free up approximately €35 billion for taxpayers.
The FDP is advocating for increased income tax thresholds similar to the Union’s proposals but with its version calling for the top tax rate to kick in at €96,600. Their plans also include adjustments for inheritance taxes and the greater provision for tax breaks for families.
Conversely, the SPD’s perspective focuses on wealth redistribution, proposing the reinstatement of wealth tax levies on assets exceeding €100 million. This move could see relief for 95% of income recipients, freeing up approximately €15 billion. The SPD is pushing to minimize the impact of the real estate tax on renters, proposing stricter rules on landlord practices.
Greens have taken a distinctive approach by introducing a billionaires' tax, which according to Robert Habeck, could yield €5 to €6 billion annually. They support suggestions to improve tax credits for low-income individuals, aspiring to integrate these protections directly without cumbersome application processes.
These competing tax proposals highlight the disparity between right-leaning parties, which prefer broad tax cuts and reductions, and left-leaning parties advocating wealth redistribution and social justice through taxation. Economists like Steffen Lange express concerns saying, "The retention of climate funds is commendable, but hesitance to stratify wealth and income taxation remains persistent."
Notable also is the stance of the AfD, which seeks to radically simplify Germany's tax structure by eliminating wealth and inheritance taxes, aiming instead to promote job creation through less restrictive taxation.
Political reactions are already illustrating the stakes of this election, especially following CDU’s electoral success. Friedrich Merz remarked, "We have won the federal elections very clearly. Now we must find ways to enable government formation." Olaf Scholz, opposing Merz, conceded, "This result is very bitter for the SPD. We lost the election; there’s no denying it."
The Left party focuses heavily on the Bürgergeld (basic income) initiative, positing the need for reform without harsh punitive measures, whereas the CDU emphasizes the potential for stricter penalties for so-called "Totalverweigerer"—those refusing job offerings. This framing of welfare recipients reflects broader societal tensions around work ethics and government support.
Prominent experts have pointed out the potentially damaging effects of categorizing welfare users as lazy or uncooperative. Data from the Federal Ministry indicates the actual number of "Totalverweigerer" is small, with tight sanctions reportedly affecting only about 1.3% of those available for work.
This undercurrent of economic strategy questions turns a spotlight on how these discourse dynamics shape the upcoming election. Each party's approach to economic restoration, tax policies, and welfare reform will play pivotal roles moving forward, with intense negotiations anticipated. Experts note, as the election campaign unfurls, resolving these financial ideologies is not only pivotal for the economy but solely intrinsic to Germany’s social fabric.
With the stage set for these pivotal discussions, German voters will soon confront fundamental choices concerning their economic futures. The 2025 election isn’t just about which party assumes power; it’s about determining the financial narrative for generations to come.