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Should Germany hit the rich with a wealth tax?

Published: 11 Jul 2012 16:47 GMT+02:00

The German Institute for Economic Research (DIW) calculated that if the wealthier members of society were taxed a one-off chunk of ten percent of their fortunes over and above €250,000 per head, it could make a real difference to reducing the country's debt.

The tax could even be tied into a mandatory bond scheme – where the state promises to pay back the money with interest as and when it can.

The idea is that such a “capital levy” – a one-off wealth tax – would only benefit the economy as it would not reduce all-important consumer demand. Reasonable personal allowances would be drawn up to make sure the tax does not impoverish people, and there would be measures to protect businesses.

But could such a tactic destroy trust and faith in the system? Would it encourage rich people to hide their wealth, or even leave the country? Is it the kind of ‘eat the rich’ solution offered up in student debates?

A writer at the Frankfurter Rundschau argued that those hit by the levy would also be those who would most benefit most from a stabilisation of the financial system and expensive bank bailouts.

Would it be fair to expect the wealthiest among us to contribute to keeping the national debt to sustainable levels and so help keep the crisis from crossing Germany’s borders? Or would Germany be shooting itself in the foot?

Registered users of The Local may add their comments in the field below. If you haven’t signed up yet, you can do so here – it’s free and only takes a moment.

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Your comments about this article

17:58 July 11, 2012 by IchBinKönig
The 'Rich' are/will be paying for the vast majority of the Debt anyway. It certainly won't be the 'Poor'. What you are essentially saying here, is that you would like an Advance. A down Payment, and Security Deposit for the EUs new Villa in Greece.
18:30 July 11, 2012 by Englishted
Why oh why?

Why make it only a one off ?.
20:32 July 11, 2012 by IchBinKönig
@ Englishted

'Why make it only a one off ?. '

Yes, make your industrious countrymen PAY THOSE BANKERS! Not one off. All off, yes?

This was the end of the Occupy Wall St. Movement wasn't it? When the Occupiers realized THEY WANTED the Bankers paid off.
22:37 July 11, 2012 by finanzdoktor
First, if they were to levy such a tax as one-off, it probably wouldn't stay that way. Instead, once it found it could get away with it, there would be more of these levies. Second, how would you implement it so as not to adversely affect small-business owners, who employ more individuals than large corporations? The devil is always in the details. And, lastly, always hear about how taxes should be "fair" and yet in most developed countries, the higher income earners are taxed or pay a great proportion of taxes versus other income groups. Is that fair to make it more? Or, as the article mentions, are shooting ourselves in the foot?
23:14 July 11, 2012 by taimoorbhatti
Why not tax slightly the huge sums of money stored in banks? Rather than reward people for not spending, the government should tax that money!
23:44 July 11, 2012 by wxman
Only if you want them to move to Norway!
07:56 July 12, 2012 by paynet2128
This is the dumbest thing I have ever heard of. The Governments would realize that they could get away with it against the rich, in later years it will become the middle class and then maybe even the poorer classes. I suggest European countries try to live within their means instead of borrowing money to pay for social programs.
10:10 July 12, 2012 by DoubleDTown
where/when did these "respected economists" get their doctorates? In East Germany pre-1989?
13:23 July 12, 2012 by Insel-Affe
I think it's a good idea, but it should only apply to private persons who are hoarding cash, and they should leave investors alone. I wonder how much they could whip up, then?
20:00 July 13, 2012 by gtaglia
No! Never! The problem here is not insufficient revenue, but excessive government spending. If government took everything from everyone, it would still not be enough. Taxes are already far too high and governments continue to borrow and spend more than they take in, which eventually builds up a debt that cannot and will not be repaid. The only difference between Greece and the rest of the EU is a matter of time. Most of the things government spends money on either shouldn't be done at all, or could be done better and cheaper by individuals themselves (if they weren't being taxed into poverty), or private industry. As Frederic Bastiat said, "Government is the great fiction through which everybody endeavors to live at the expense of everybody else", the wealth to pay for it does not exist and continued borrowing will eventually result in disaster.
10:37 July 15, 2012 by raandy
Taxing based on a percentage of earned income is reasonably fair,taxing the rich for being rich is reasonably unfair.
11:48 July 15, 2012 by Wrench
The former US presidential candidate Ross Perot wanted to do away with the Internal Revenue Service by taxing every working stiff in the US 15% no matter how much your earnings. Seems fair to me. The same thing applies here. Why don't we also have a income tax on politicians.
11:55 July 15, 2012 by asteriks
At one side, debt is caused by politicians and their lack of knowledge to lead economy, at other side, riches escape to Asia in any case, so, better to take money from them before they escape. Their profit is created by workers but money taken by the state finish in pockets of politicians and not in pockets of workers. Politicians and the state are expensive, burden on the back of workers and on the back of capitalists. Even better measure would be forbidding to sell products in Germany if someone closed company in Germany and opened somewhere else, it can be covered with story about fight against slavery. Foxcon workers jumped from roof many times, therefore Apple products should be forbidden for German market until Apple change their politics in choosing subcontractors. Solution should be long term and not short term taking money from riches. Then riches would keep business in Germany rather than to move it to Asia with aim to make bigger profit for themselves. If it is not done, Europe will become poorer and poorer and Asia richer and richer, so in the end, one day Europeans will not have money to buy products manufactured in Asia. Ask Mercedes where they sell more cars, in Europe or in Asia, then you will see that already now Europe became weak for Asia. Solution is not one time tax for riches, solution is cheaper administration, cheaper politicians, and pushing riches to keep factories in Europe.
20:11 July 15, 2012 by pjnt
Lots of good input here. 2 main points:

If they do it once and get away with it, they will do it again.

It is the incompatence of the existing government that need addressing.

It is not that I don't agree that the wealth should be more equally spread out, but not this way. Stop spending money you don't have, stop giving others money you won't get back and don't have to give. Debt and Deficits are only one side of the coin, I would highly recommend we try Savings and Surplus!

It should be made manditory that outside of a national emergency you may not borrow. And banks gambling away their clients money is not an emergency.
00:06 July 16, 2012 by Berlin fuer alles
The article should be about "should the rich hit Germany with a productivity tax". That is what will happen if you mess with those with money and produce wealth.
18:19 July 16, 2012 by Eric1
This is just pure greed to take more money from the wealthy. They are being screwed from every side. Totally immoral.

"A respected economic institute", respected by whom? Joseph Stalin.
16:11 July 19, 2012 by neunElf
Governments think they have a revenue problem, not a spending problem, therefore it will ,only get worse as they will begin eating the goose that lays the golden eggs!

Government consumes, the private sector produces, that metric will never change.

If governments want long term stability they should be doing all possible to foster growth, instead they are doing just the opposite.
18:25 July 20, 2012 by Berlin fuer alles
Tax your way out of trouble. Great idea. Don't know of any example of it ever working. Hopefully the rest of the EU does not let Dr. Merkyl and Mr. Hyde lead them down this road.
08:17 July 24, 2012 by Ozichick
Germany is fast becoming like Australia: it penalises the hard-working, highly-taxed citizens and rewards the lazy, non-contributing parasites who demand everything on the proverbial silver platter. Jealousy is a curse!
16:36 July 24, 2012 by majorityrules
NO! Another bad idea from peole who have a bad vision for your future. Higher taxes only bring on more- higher taxes. eventually for everybody. Why you ask.? The people who have this wonderful idea of class warfare only have one solution to all of their made up problems - higher taxes on "alleged rich people" - A class of people those big govt idiots will no doubt 'create based on an income level they FEEL is rght"... Higer taxes for what purpose? More taxes has been proven in most every country to never work for the people or even the govt. It takes from people and gives it to govt which wastes it on lousy ideas. And by the way, Govt, and the idiot representitives which work there, never votes itself to get smaller. Govt is by nature a chronic Taker therefore Tax payers are always on the losing end. The Robin hood theory of taxing the rich and giving to the poor has been tried over and over and over in many different countries and regardless if rich people stay rich, one thing is for sure, higher taxes have never ever helped remove the poor from remaining poor.
14:29 August 5, 2012 by devpriya
Absolutely ! Throughout the banking history of the past 500 years there have again and again been times, when the wealthy needed to give back a part of what they have taken from those, who actually do the hard work.

A one-time-tax of 10% on accumulated wealth is more than fair.

Our system promotes those, who have lots of money - the real crime against humanity is the concept of compound interest. Those who have a lot get even more, just by keeping their money idle on bank accounts and collecting interest.

Actually our system has to change, from receiving interest on idle money to having to pay tax on all money, which is not invested into REAL business - into production, environmental sustainance, land, communal and social projects and more.

This 10%-tax could be modified - i would rather leave it up to the wealthy, in which projects they want to invest, assumed that they can prove, that it serves the people, the 99%, who can't hoard money on accounts, because they hardly earn enough to survive.

It's time to stop the concept of . Money is a symbol for the exchange of energy. When we become aware, that around 6000 people worldwide hold about 90% of the planets ressources, we can easily see, that this exchange has been working from down to up in the past few hundred years. Which makes the wealthy richer, and the simple people more poor.

Enough of this. It's 2012. If all people and countries stopped paying bank debts, within a few weeks all banks would be willing to make new deals.

Just look at Iceland - unheard of the world, Mainstream media don't report on it, because this would be contagious to all Euro-countries, they changed government, refused to pay debts within the harsh conditions the banks wanted to press them in, arrested many banksters and are now economically in a much better position than when their process started in 2008.

Time for a change...
22:40 August 7, 2012 by neunElf
"Our system promotes those, who have lots of money - the real crime against humanity is the concept of compound interest. Those who have a lot get even more, just by keeping their money idle on bank accounts and collecting interest."

Do you know why and how they are p[aid interest?

Because their deposits have been used to invest or loan money to someone that EARNS interest, they are paid from the proceeds, THE FACT THAT THEY HAVE DEPOSITED MONEY DOES NOT MEAN THAT THE$ MONEY IS NOT BEING USED IN THE ECONOMY!

NO ONE PAYS YOU INTEREST JUST BECAUSE YOU HAVE A SAVINGS ACCOUNT, the money must be used to earn income.

Please stop this ridiculous claim about people hoarding cash as if they are not contributing!

Thank god someone is saving money.
13:49 September 2, 2012 by narfmaster
There are rich people right now (Warren Buffet, Maurice Lévy, etc) who have ASKED to be taxed more because even they realize the tax situation in most countries is quite ridiculous. People who earn millions have more money than they know what to do with. They know that other people work just as hard as they do and those people sometimes don't eat to pay for the heating. Circumstances are not always fair.

Do governments need more money? Well, yes, they do. Most governments around the world are in debt, and for some (Greece, Spain, etc.) it is causing those countries major difficulties. It's bad for business. However, if the rich people in those countries would pay a bit more (or in the case of Greece, just pay what they owe) these problems wouldn't exist. It makes financial sense for them to pay their taxes or a bit more because then their businesses can earn more money in the calm business climate. Instead, these countries are having lots of problems and it is costing them money anyway.

So, yes, Germany needs some cash. Some Germans have some cash. If they contribute a bit more, their country will keep its credit rating and German business will continue to thrive. What's the problem with that?

On a side not, the worst offenders are those who live off of inheritance and don't work. They are not job creators. They do not contribute to society. The world would be better without them and I for one would not cry if there was a massive tax put on them. If it were large enough, perhaps they would be encouraged to find jobs and work like the rest of us.
05:50 September 4, 2012 by bassplayer
Governments waste so much money; time to revolt; the rich got there by hard work and managing their money, so it should not be available for government and idiot politicians to waste.
05:44 September 6, 2012 by sally#
Some people says that the rich get the most benefit from the country,so of course they shoulder most responsibilities to the country. But if you change the perspective, the rich accumulate the wealth by their hard work and intelligence.There's no reason to charge more and it's nothing wrong with rich itself as long as earned in the legal way. Furthermore,even if taxing the rich can relieve national debt, it's just an utterly inadequate method in dealing with a severe situation.
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