Economy in crisis: Taxpayers demand rapid reforms!

Economy in crisis: Taxpayers demand rapid reforms!

The German economy has not recorded any economic growth for the third year in a row. This emerges from an analysis by the Taxpayers' Association (BdSt), which at the same time expresses muted expectations regarding future tax revenues. These are increasing, but not to the extent hoped for. taxpayer.de reports that the new federal government must therefore act immediately to improve the economic situation.

The BdSt has formulated an agenda that is to be implemented in the first 100 days of the new government. One of the central measures is the “70-day program” of the black-red coalition. In this context, the BdSt is calling for comprehensive incentives to stimulate the economy and strengthen competitiveness. A reduction in bureaucracy is also considered necessary. According to the BdSt, tax stimulus should not be postponed any further in order to stimulate the economy.

Fiscal consolidation and priorities

Another appeal from the BdSt is for the rapid preparation of budget drafts for the years 2025 and 2026. The forecasts of the May tax estimate play a crucial role here. The coalition agreement also provides for a financing reservation and points out the need to exercise restraint when it comes to new spending. Given that tax revenues are approaching the 1,000 billion mark, there is a significant need for consolidation on the expenditure side of the federal budget. It is recalled that all state tasks, subsidies, support programs and special funds must be urgently examined.

As the German Institute for Economic Research (DIW) notes, Germany faces major financial challenges, ranging from infrastructure to education to migration-related aspects. These factors, together with demographic change and the shortage of skilled workers, make budget planning more difficult. Tax relief of more than four percent of GDP, as proposed by parties such as the FDP and AfD, is considered unrealistic. DIW.de emphasizes that the tax revenues of over two percent of GDP demanded by the Union can also be viewed as overambitious.

Tax reform proposals

A realistic relief of up to one percent of GDP, as envisaged by the SPD and the Greens, could represent the maximum. The debt brake is also expected to be relaxed in the next legislative period in order to enable public investments in defense and other important topics. However, reducing existing spending programs is essential to finance additional tax relief. Annual savings of 50 billion euros are necessary to achieve long-term goals.

In addition, it is suggested that existing tax breaks be evaluated and, if necessary, reduced. In particular, the proposal from the SPD and the Greens to reform real estate taxation could potentially contribute to tax fairness. Increasing property taxes and reducing inheritance tax privileges are also being discussed as measures to limit the accumulation of wealth.

Finally, it should be noted that there is no party that is discussing an increase in VAT, even though this could generate high revenue. An increasing burden through indirect pension cuts for higher-earning retirees and increases in social benefits such as citizens' benefit or housing benefit may also be necessary in the coming years to meet the existing challenges.