Tax top earners to fund energy bill support, say German govt advisors

Higher earners should pay more in taxes to help finance support for households facing soaring energy bills, the German government’s council of economic advisors said Wednesday.

Sweeping support was “justified”, the expert group said in a report, while calling on the government to make their measures more “targeted” in order to show greater “solidarity” amid the energy price crisis.

Germany has earmarked 200 billion euros (dollars) to ease the burden on businesses and households from rising costs for energy in the wake of the Russian invasion of Ukraine.

The package includes a partial cap on the price of gas and electricity that will come into force in 2023.

Higher earners should make a larger contribution to financing support measures through a “temporary increase of the top rate of tax or a very limited energy solidarity levy”, the experts suggested.

“At the moment it is about targeted relief of lower and middle-income households, while public budgets should not be overstrained,” said Achim Truger, a member of the advisory council.

The proposal is expected to spur a lively debate within Germany’s coalition government between Chancellor Olaf Scholz’s Social Democrats, the Greens and FDP liberals.

The head of the Social Democrats’ parliamentary group, Rolf Muetzenich, on Tuesday said the experts’ suggestion was “very interesting” in response to leaked reports.

The proposal has however received a frosty reception from members of the FDP, who have positioned themselves against tax rises.

“In these times of runaway prices it is all about relieving people not adding to their burdens,” said Christian Duerr, head of the FDP parliamentary group.

A solidarity levy would “weaken companies and private citizens”, he told Bild daily.

“We must deal with this crisis with solidarity,” Scholz said at the presentation of the report Wednesday.

Massive support measures are warranted because they “build trust” to get through the crisis, he said.

Europe’s industrial powerhouse has been squeezed by the sharp rise in energy prices, with the expert council predicting the German economy will shrink by 0.2 percent in 2023.