Germany’s once-temporary solidarity tax on income has found a lasting home. Introduced in 1991 to cover the extra costs of the first Gulf War, development aid to Eastern Europe and German reunification, lawmakers made it a permanent part of the German tax code in 1995. They sold the 5.5 percent surcharge on people's income tax bill as necessary to cover the never-ending costs of reunification.
But the solidarity tax is young by German standards. Some taxes are so old that these days they couldn’t even cover the things they were originally designed to finance. The most famous is the duty on sparkling wine. Wine taxes were nothing new in 1902 when the champagne tax was passed, but its goal was financing the monarchy’s military fleet. The tax is still around but, if you know anything about the condition of the German navy, you know the tax is no longer going to frigates and dreadnoughts.
It’s not the only aging tax – there’s also the oil tax, introduced in 1939 to finance road construction. It was renamed the energy tax in 2006 but is still alive. And many streets are still in bad need of repair.
There are very few habits or life aspects that haven’t been the basis for a tax. And many remain, such as taxes on betting, cinemas, dogs, spirits, tobacco, sex, lotteries, dancing, coffee and even more common ones such as insurance taxes.
But there is hope! Occasionally we see a mass tax die-off – like in 1993. On January 1 of that year, the salt tax was eliminated as was the illuminant tax – both had been around since the Middle Ages. The illuminant tax was originally levied on candle wax, but, thanks to Mr. Edison, was expanded to include light bulbs. The sugar tax was also dumped in 1993. It was originally a sugar beet tax. Oh, and a tea tax introduced in 1950 also met its maker.
So what have we learned? Governments can eliminate taxes. Where there’s a will, there’s a way. Who wants to pay for the infrastructure in the former East Germany as long as we’ve been paying for a royal fleet that found its final resting place at the bottom of the ocean some time ago? Nobody - and especially not Germans, who are already the runners-up in the world tax-paying championships. At just under 50 percent, Germany’s tax burden is second only to Belgium's, according to the OECD, and it’s yielded record income for the government.
It’s time to clean house again. And by “clean house” I mean eliminate the solidarity tax. The income – €18 billion per year – flows into the general budget and can even be used to finance parliamentarians’ salaries. That sounds like the champagne talking but it shows that the tax hasn’t had much to do with German reunification for some time. It would be nice if history remembered it as the temporary tax it was promised to be.
This article was adapted in English by Andrew Bulkeley, an editor in Berlin for Handelsblatt Today. To contact the author: [email protected]