The German Times, September 2011
Should we soak the rich? Some are actually volunteering to pay more tax to help national economies groaning under the burden of high public debt. In the United States, Warren Buffett has publicly called on the government to raise personal income tax rates on him and his fellow billionaires. At the end of August, 16 of France’s wealthiest citizens signed a letter to Le Nouvel Observateur calling for an “exceptional contribution” to be imposed on the country’s “most fortunate” taxpayers. In Italy, Ferrari boss Luca Montezemolo is also prepared to pay more. And in Germany, too, some of the wealthy elite have expressed a willingness to accept a financial gesture of solidarity. But many have remained silent, while others still have complained that the wealthy are being unfairly stigmatized.
One can only guess at the motivation of the altruistic mega-rich. Is it concern that young people doomed to pay off the debts of their parents and grandparents could turn nasty? (Germany’s younger generation should not forget that, alongside two trillion euros of public debt, they are also in line to inherit seven trillion of private wealth). Or is the insight that the wealthy and the high-income earners have, relatively speaking, benefitted much more in recent years from the tax regime?
Warren Buffett certainly thinks so: “While most Americans struggle to make ends meet, we mega-rich continue to get our extraordinary tax breaks,” Buffet admitted in an opinion piece for the New York Times. “My friends and I have been coddled long enough by a billionaire-friendly Congress. It’s time for our government to get serious about shared sacrifice.”
In Germany, it was the Social Democrats under Chancellor Gerhard Schröder, who slashed the top rate of tax from 53 to 42 percent. The conservative-Social Democrat “grand coalition“ led by his CDU successor Angela Merkel cut capital gains tax from 42 to 25 percent as well as reducing inheritance tax. As a result, some 13,000 people with an annual taxable income above one million euros are paying less money into the state coffers than they used to – in the midst of a major public debt crisis.
Germany, faced with the lion’s share of the bailout measures for troubled eurozone economies, had to abandon its goal, adopted in 2007, of a balanced budget by 2010. Instead, Berlin has had to take on new debt. Ordinary taxpayers, forced to bear the additional burden despite neither profiting from the previous tax cuts nor contributing to the need for fresh borrowing resulting from failed speculation, may ask themselves if that is fair?
Clearly, it is not. And the excuses trotted out by the alliance of politicians and the wealthy to resist calls for higher taxes on the rich are more than embarrassing.
Some claim that higher taxes prevent job creation. But Warren Buffett argues that lower taxes in the US have led to “far lower job creation.” Others argue that the wealthy will only flee to foreign havens, like Germany’s Michael Schumacher, if taxes at home are too high. That would no longer be possible if the member states of the European Union agreed to harmonize their tax rates and required salaries, earnings, and company turnover to be taxed at source. Not only does that currently look unrealistic, but there is still not even any sign of the promised stricter regulation of financial markets.
Politicians at the national and the European level continue to blame each other for the failure to agree such measures. But the need for determined political action has never been greater. The political classes should be ashamed that it is the rich themselves – or some of them at least – who are now calling for a more equitable distribution of wealth. The 16 signatories of the letter to Le Nouvel Observateur recognized that they are acting partially in their own interests: “We are aware that we have fully benefited from the French model and European environment to which we are attached and which we want to help preserve.” In other words: It’s payback time.