New Economy Short Cuts Bundestag Election – Wealth Tax, Debt Brake, Tax Cuts

To date, the election campaign still offers little depth of content. What's not lacking are relevant megatopics for the future. This is why we invited leading candidates for the Bundestag to discuss their parties' key economic policy concepts with us.

 

Even if it is hardly apparent from the election campaign so far, there is a lot at stake in the election year 2021. The challenges are complex and comprehensive, while time – for example, with regards to the ever accelerating climate change – runs increasingly short. Even the Federation of German Industries recently published a call in “Welt am Sonntag” for “moving away from trivialities in the face of the enormous challenges at hand […].”

We should be talking about major decisions, about the course to be set for the coming decades, about new economic guiding principles and political ideas. But what are the parties saying about the big issues at stake? How well can the reintroduction of the wealth tax be justified; or the claim that large tax cuts will eventually finance themselves? What arguments can be made in favor of a reform of the debt brake  – and which against? And would a nationwide rent cap help in the long term? Or a climate policy that focuses more on rising CO2 prices?

We invited prominent candidates for election to the Bundestag to present what they promise in their election programs on one of these major economic issues of our time. In our special Short Cut series on the Bundestag elections, they each spent a good hour in discussion with proven experts.

We spoke with Norbert Walter-Borjans (party chairman, SPD) and Christian Dürr (deputy parliamentary party leader, FDP), with Anja Hajduk (deputy parliamentary party leader, Bündnis 90/ Die Grünen), Thomas Heilmann (CDU) and Caren Lay (deputy parliamentary party leader, DIE LINKE). We have accompanied the discussions on our website with dossiers on the economic basis for the respective proposals. Here is an overview of the relevant issues and our discussion partners.

The topics and guests

How effective is a wealth tax, Norbert-Walter Borjans?

The Corona pandemic has recently rekindled discussions about growing social inequality in Germany. However, inequality in Germany has not only been growing since the pandemic. This is proven by a study commissioned by the Forum and conducted by three German economists headed by Bonn professor Moritz Schularick, who were the first to comprehensively record the long-term development of wealth inequality in Germany on the basis of tax data, surveys and lists of the rich.

The SPD is proposing to bring back the wealth tax – with a uniform tax rate of one percent for high wealth. But how sensible is the wealth tax from an economic perspective? How would it affect the Gini index? And is a wealth tax an effective single instrument, or are complementary measures needed to have some effect on inequality? We talked about this on August 24 with Norbert Walter-Borjans, party leader of the SPD, and Markus Grabka of the DIW.

The whole session as re-live here:

Do tax cuts on credit end up financing themselves, Christian Dürr?

Promises of tax cuts are not unusual during election campaigns. Who benefits and how much depends to a large extent on the individual parties and on individual income and wealth. However, there is little agreement on the economic consequences of tax cuts or increases. In addition, the Corona pandemic has cost the state coffers a lot of money and driven up debts, fuelling an already heated debate.

Against this backdrop, we talked to Christian Dürr about the “Unleashing Pact for the German Economy”, i.e. the FDP’s demand for far-reaching tax breaks. These are intended to enable Germany to grow out of the debt incurred during the Corona crisis. At the heart of the FDP’s demands is the argument that tax cuts act as investment incentives and thus, on balance, as revenue multipliers. From an economic point of view, does it make sense in the current situation to reduce the tax burden on German companies and high earners to the extent proposed by the FDP? What does empirical research say about fiscal multipliers? Is it already possible to draw valid conclusions from the latest US tax reform? We were able to talk about this with FDP parliamentary group vice-chairman and Member of the Bundestag Christian Dürr and economist Rüdiger Bachmann (University of Notre Dame).

The whole session is available as a re-live here:

Will a nationwide rent cap help against the housing crisis, Caren Lay?

Not least since the temporary introduction of the rent cap in Berlin, there has been much heated debate in political circles and also in the media about German housing and rental policy. This has only intensified during the election campaign. Hardly any other party is making the issue of housing policy as much its own as the Left Party. In its election program, the party promises, among other things, to cap rents nationwide, to transfer more apartments into public ownership, and to massively expand social housing construction – with 15 billion euros per year.

But would a nationwide rent cap help in the long term – and does such intervention in the market even make sense from an economic point of view? We talked about this on August 23 with Caren Lay, the deputy parliamentary group leader of the Left Party, and Claus Michelsen, the former head of economic research at the DIW.

The entire session is available as a re-live here:

Do we need to reform the debt brake, Anja Hajduk?

During the Corona crisis, with its enormous financing requirements, the federal government suspended the debt brake until at least 2022. When and in what form to return to the debt brake after the crisis is a matter of disagreement among the parties, as well as among academics.

In their election program, the Greens argue for a reform of the debt brake. The debt brake is to be retained for consumer spending, but necessary future investments are to be given more leeway in the amount of net investments. But how sensible is this plan from an economic point of view? Does it restrict fiscal policy flexibility too much? Or, on the contrary, does the proposal not go far enough to finance important investments, for example in infrastructure and climate protection? We talked about this with Anja Hajduk, deputy parliamentary group leader of the Greens, and Philippa Sigl-Glöckner, director at Dezernat Zukunft.

The entire session is available as a re-live here:

How can we rethink the state, Thomas Heilmann?

In view of the Corona pandemic, criticism of the state’s crisis management increased again last year. This is not surprising, because it is precisely during crises that the state’s ability to perform and respond is put to the test and attention is drawn to its weak points. There are therefore many voices calling for reforms. However, there is some disagreement about what these reforms might look like – and whether they would be a potent way to solve the major challenges of our time.

In its election program, the CDU calls for a modernization offensive for the state – including administrative modernization, digitization and a reform of the state system. But how sensible are these reforms – and how can they be implemented? Will the important problems – lack of investment in the climate, for example, or the weaknesses brought to light in the pandemic – be addressed in this way? We discussed this with Thomas Heilmann, Member of the German Parliament from the CDU/CSU parliamentary group and co-author of the book ‘Neustaat’, and Henning Vöpel, Professor of Economics at the HSBA Hamburg School of Business Administration and until recently Director of the Hamburg Institute of International Economics (HWWI).

The entire session is available as a re-live here:

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