Germany will elect a new federal government on 26 September. Parties’ election campaigns are in full swing. As always, money is a crucial factor to win votes. In their election programmes, parties propose ideas to restructure taxes and the social security system. In the #ZEWPodcast, Professor Sebastian Siegloch, head of the ZEW Research Department “Social Policy and Redistribution”, explains how these reform proposals are reflected in citizens’ account balances.

Picture of ZEW economist Sebastian Siegloch in the #ZEWPodcast
ZEW economist Sebastian Siegloch explains in the podcast how the election programmes of individual parties affect households financially.

How much is left after taxes? This question concerns every household, therefore it is an essential aspect in the upcoming federal elections. Still, for voters it is quite difficult to see how proposals in an election programme will affect them personally. On behalf of the daily newspaper “Süddeutsche Zeitung”, Siegloch and his team have analysed the individual parties’ tax, family and labour market policies as stated in their election programmes. The researchers applied a simulation model to evaluate how taxation will change for private households.

Higher inequality under CDU/CSU and FDP

Sebastian Siegloch observes that the days of political uniformity are over. He states that “the goals of the individual parties can be clearly distinguished as they focus more on their core values again.” The ZEW analysis has identified two trends when comparing the different election programmes. “Centre-left parties aim to reduce taxes on lower-income households and to raise taxes on high-income households,” says Siegloch. This approach would result in a slight increase of the state budget. “Centre-right parties, however, offer tax reliefs primarily to higher income groups, which on balance would burden the state budget,” says the ZEW economist.

It should be noted that the calculations are based on a static model that does not take long-term behavioural responses into account. Nevertheless, Siegloch is not convinced that the party programmes of the Conservatives and Liberals “can initiate economic growth that will practically offset this effect.”

The research results should provide citizens with a good starting point to help them decide which party they want to support. Still further data on topics not covered by the study, including climate, debt and foreign policy need to be considered, the ZEW economist adds.

Date

31.08.2021

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