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Wealthy should fund middle income tax cuts, says germany's SPD

Friday, 14 March 2014   (0 Comments)
Posted by: Author: Ulrika Lomas
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Author: Ulrika Lomas

The leader of the Social Democrat (SPD) party, Sigmar Gabriel, has backed proposals to adjust personal income tax brackets to undo stealth taxation, which he said had unfairly hit middle-income earners. The SPD championed the idea in the run up to the September elections last year, and proposed financing the measure through a hike in the top rate of income tax.

In December 2012, whilst in opposition, the SPD blocked the former Government's plans to raise income tax bands by a total of 4.4 percent. The party argued at the time that the tax cuts would be irresponsible without measures to finance the move. The SPD waved through plans to raise the personal income tax allowance to EUR8,354 over two years, however.

The SPD is now in Government with the Christian Democratic Union (CDU), but will still only agree to tax relief for middle-income earners provided that the country's top earners face higher taxes, Gabriel said.

Gabriel seeks to tackle what is commonly termed "Cold progression" (kalte Progression) in Germany, or "bracket creep," which occurs when the Government fails to adjust marginal income tax brackets in line with wage inflation, dragging more taxpayers into higher income tax bands. The German Association of Taxpayers (BdSt) recently warned that if income tax rates are not adjusted, taxpayers will face stealth tax worth EUR55.8bn (USD76.8bn) on their income between 2014 and 2017.

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