BERLIN (MNI) – Senior lawmakers of German Chancellor Angela
Merkel’s center-right CDU/CSU-FDP coalition on Thursday clashed over the
future course on tax policy.

The government had recently announced that it plans tax cuts on
small and medium-sized incomes by 2013.

Norbert Barthle, the CDU/CSU’s parliamentary budget policy speaker,
said in a newspaper interview published Thursday that tax rates for high
incomes should be raised in order to finance cuts for lower brackets.

Currently, the top tax rate of 45% kicks in at an annual income of
E250,000, while the next lower rate of 42% starts at E53,000.

“I think one could introduce a further step in between to achieve
higher tax revenues,” Barthle told the German regional daily Suedwest
Presse. “Unmarried persons who earn between E100,000 and E250,000 would
be able to cope with a somewhat higher tax rate,” he argued.

This would allow a rise the threshold for the 42% income-tax rate
to E70,000 or E80,000 per year from E53,000, Barthle explained.

The opposition center-left SPD and ecologist Greens, who control
the upper house of parliament, welcomed the proposal. The parties had
said previously they would block any tax cuts in the upper house.

However, Volker Wissing, the parliamentary fiscal speaker of the
FDP, the junior partner in the coalition, rejected Barthle’s proposal.

“The demand by Norbert Barthle for tax hikes for ‘top earners’ is
wrong from an economic and fiscal policy viewpoint,” Wissing argued. He
noted that such a tax increase would also hit small and medium-sized
businesses, as many of these firms are taxed under the personal income
tax regime.

The Bundesbank said recently that it opposes tax cuts without
measures to offset the resulting revenue losses, pointing to the dire
fiscal situation of many local governments.

Given the heavily strained budget situation of many municipalities,
“tax cuts without counter-financing are not appropriate,” the central
bank said.

Income tax revenues in Germany are split between the federal
government and the state and local governments.

–Berlin bureau: +49-30-22 62 05 80; email: twidder@marketnews.com

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