The latest estimates on tax revenue have calculated additional tax receipts of more than EUR 50bn for the next five years. The strong tax receipts are due to the good economic situation and the high level of employment. This is not a new development but one that has already been observed in the last few years. Correspondingly, Germany’s new borrowing has fallen to 0% and debt has been reduced slightly.
However, what initially appears to be a favourable development of Germany’s fiscal budget is deceptive. The increase in fiscal revenue in recent years would have facilitated a very ambitious debt reduction programme. Numerous socio-political measures were agreed instead, whose benefits are frequently not apparent, therefore demonstrating very clearly that the political process does not or hardly foresees a sustained reduction of sovereign debt.
If the federal government fails to use the considerable windfall for reducing debt, one would at least expect the tax burden on private households and companies, which is high by international standards, to be lowered. However, this is already ruled out now in the general election campaign. The parties are therefore depriving themselves of fiscal political scope without good reason. A tax cut would be long overdue. There is no doubt that the federal government needs sufficient funds to secure and further develop the country’s future sustainability. The state must also be in a position to meet its regulatory and socio-political tasks. Using public funds for political patronage ultimately culminates in growing disenchantment with politics, which plays into the hands of the populist parties. The government should instead leave the money where it belongs – with its citizens and businesses – and where it will be used efficiently.