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Germany Hints At Solidarity Tax Cut

Friday, January 12, 2018

The Christian Democrat Union (CDU) and the Social Democratic Party (SPD) have reportedly agreed on a program for government that includes a solidarity tax cut.

The deal will lead to the formation of another "grand coalition" between Germany's two main political parties.

Although the coalition agreement has yet to be formally announced, preliminary reports suggest that negotiators have struck a deal on the outlines of a program, concluding a process which began after last September's inconclusive general election.

While the SPD's demands that the tax burden be increased on high-income taxpayers were refused by the CDU, the largest political party, an agreement to reduce the solidarity tax on low- and middle-income taxpayers was reportedly secured.

Used to help fund economic development in the east of Germany, the solidarity tax is a 5.5 percent surtax on both corporate and individual income.

While the SPD has managed to secure funds for a substantial infrastructure investment program, it is understood that the agreement will commit the new government to maintaining balanced budgets.

The CDU and the SPD began talks on a grand coalition after negotiations for a so-called Jamaica coalition, between the CDU, the Free Democrats, and the Green Party, collapsed last year.