Increase in Estate Taxes Proposed by German SDP for Wealthy Families
The Social Democratic Party (SPD) of Germany has put forth a new plan to generate additional revenue for the country's budget by reforming the inheritance tax system. SPD General Secretary Tim Kluessendorf unveiled the proposal in the newspaper Tagesspiegel yesterday.
Klüssendorf criticises the practice of the super-rich systematically transferring large sums of money tax-free to their children over their lifetimes. He believes that this unfair practice must be stopped, and the proposed changes would aim to do just that.
Under the current system, parents can bequeath or gift €400,000 tax-free to their children every 10 years. However, the SPD's plan includes a "lifetime tax allowance," a fixed amount that each German can inherit or receive as a gift tax-free throughout their lifetime. Klüssendorf proposed a specific amount of €400,000 for this allowance.
The SPD aims to generate over €10 billion in additional annual revenue for Germany's budget by abolishing tax exemptions. Klüssendorf argues that the current system of calculating allowances based on blood ties and their regular use is outdated. He proposes allowing individuals to decide who is closest to them for inheritance purposes, deeming it better and fairer.
The proposed changes would increase German inheritance taxes, which are already among the highest in Europe. However, Klüssendorf points out that more than half of the people in Germany do not inherit anything from anyone. He states that anything above the lifetime allowance would be taxed consistently.
The SPD needs the consent of its senior coalition partner, the Conservative Christian Democratic Union (CDU), for the tax plans. CDU leader Jen Spahn has recently criticized the unequal distribution of wealth in Germany, which could bode well for the SPD's proposals.
However, not everyone is in favour of the SPD's plans. Economist Ulrich van Suntum, a former right-wing politician, has criticised the SPD's plans, stating that they would exempt the SPD's own clientele from inheritance tax while asking companies and high earners to pay more.
In 2024, total revenue from inheritance and gift tax amounted to €13.3 billion. The recurring €400,000 levy allowance reduces tax revenue by €8.8 billion per year, according to a report from the German Government.
Klüssendorf emphasises that the proposed changes are necessary to create a fairer and more equitable tax system in Germany. The SPD's plans are currently under discussion with the CDU, and it remains to be seen whether they will be implemented.
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