Those who benefit from Corona should pay too

Tax policy: Those who benefit from Corona should pay too

Tax policy:With high inflation and lost income due to short-time work, low-income earners are left with little to put in a safe deposit box.

With high inflation and the loss of income due to short-time work, low-income earners are left with little that would fit in a safe deposit box.

While share prices and real estate prices are rising, poorer people in particular are struggling with inflation and short-time work. It's time for policymakers to take action against inequality.

Commentary by Caspar Busse
[This article published on Jan 4, 2022 is translated from the German on the Internet, https://www.sueddeutsche.de/wirtschaft/steuern-ungleichheit-reiche-armut-1.5501503,]

It's a dangerous trend for a society that is already tending to drift apart and where tensions could become ever greater: Corona has caused the differences between rich and poor to grow, even in Germany. Those who have anyway will become richer in the pandemic. For those who have to struggle, it will be even harder. In other words, inequality is rising. Politicians should urgently take countermeasures, but it doesn't look at present as if the new traffic light government has the strength to do so.

Overall, private households in Germany are richer than ever before. According to a recent analysis by DZ Bank, financial assets are likely to have increased by more than seven percent to a record level of almost EUR 7.7 trillion in 2021. This analysis takes into account cash and bank deposits, securities such as shares and funds, and claims against insurance companies. There are no details yet on the exact distribution of assets. What is clear, however, is that it is not the lower income classes that have benefited - rather the opposite.

Booming share prices mainly benefit the better-off

During the pandemic, share prices rose sharply in some cases, and the stock markets reached record highs. But the main beneficiaries were those who had invested enough in the capital market (not to mention the rapid rise in real estate prices, which are not even taken into account in the current figures). More has also been saved and less has been spent, which is something that better-off households in particular can afford. Added to this is the currently very high inflation of a good five percent, which generally hits lower income groups harder - just like short-time work, by the way, which can lead to a loss of income.

Already there are radical demands like that of Marlene Engelhorn. The Viennese student of German comes from a wealthy family; among other things, her ancestors founded the chemical company BASF, but she does not want her large inheritance and advocates a radical taxation of inheritances and assets. Large inheritances massively exacerbate inequality; analogous to a poverty threshold, a wealth threshold should be introduced, she says. Together with other wealthy people, she founded the organization Tax-me-now and demands: "Tax us now!"

That may be unrealistic, but a heavier burden on the wealthy is definitely called for in the current situation. New public debt increases enormously in the pandemic. It stands to reason that in this exceptional situation, those who have strong shoulders and are more likely to benefit from the pandemic should be called upon to finance the Corona consequences. It would be possible to raise tax rates - even temporarily - for very high incomes, to tax inheritances more heavily or to revive a moderate wealth tax, as the SPD had also called for during the election campaign.

The fact that none of this is happening is being thwarted in the traffic light coalition by opposition from the FDP and from Federal Finance Minister Christian Lindner. He categorically rejects any tax increase, also out of fear for the economy, and instead announces tax relief. He is on the wrong track - and may be underestimating his electorate. Even some wealthy people have come to the conclusion that a moderate tax increase would be acceptable.

The Magi once brought valuable gifts of frankincense, gold and myrrh with them when they visited the newborn baby Jesus in the poor stable in Bethlehem. Wealthy people who travel far and can afford expensive gifts, and people at the subsistence level who can't find shelter - so this already existed in the Bible. And even then, the rich gave.