Corona crisis of the economy: Markus Söder tries the tax trick

Is the harmony between Markus Söder and Olaf Scholz already over? A few days ago, the head of the CSU and the federal finance minister from the SPD presented themselves more harmoniously than ever in Munich and talked about the massive financial aid that the federal and state governments provide for companies suffering from the corona crisis. But now the next debate about a recovery course for the economy is pending – and the two politicians seem to be split again.

In an interview with the “Bild am Sonntag” CSU boss Söder said: “If the first phase with emergency aid and guarantees is over, we also need a vital economic stimulus program of a similar size.” He and Scholz are still on the same wavelength, because the finance minister also considers an “economic stimulus package” the right way “to boost the economy“, as he told the newspapers of the Funke media group.

But then it comes down to the details: Söder wants tax cuts. “The solos must be abolished faster and for everyone,” said the CSU boss. “In addition, we should lower total income tax so that as many employees as possible have more money in their pockets.” Söder did not go into further detail (economist Stefan Bach explains how tax cuts could help against the crisis here in the SPIEGEL interview). But he also called for an “innovation bonus” for the purchase of environmentally friendly vehicles.

Finance minister Scholz, on the other hand, wants to base his proposals for an economic stimulus package primarily on the climate goals of the federal government. “Now it is important that we do not save against the crisis,” said the SPD politician. “Therefore, we maintain the high level of investment and secure our strong welfare state.” He also did not mention a magnitude for the economic stimulus program.

The finance minister had already said on Saturday that he was unhappy with proposals that “now put new tax cuts for top earners at the center of political planning”. As a result, the new debt resulting from the corona crisis could not be paid off as planned by 2043. Scholz has not yet responded to the new foray from Bavaria.

“Brutally refuted”: SPD leader Walter Borjans against tax cuts

Nevertheless, a coalition dispute has long broken out over Söder’s demands. SPD leader Norbert Walter-Borjans sharply criticized the CSU chairman in the “Augsburger Allgemeine”: “Adam Riese was born in Bavaria, and the Bavarian prime minister could learn from him that 156 billion euros in additional loans could not be paid off by reducing government revenues . ” Where the dismantling of public services leads can be seen in the United States, said Walter-Borjans. “There, people have believed for decades that tax cuts are self-financing through growth – and are brutally refuted every time.”

Söder should “stand with us for more investments and a better payment for the real heroes in the corona crisis,” the SPD chief continued. “Tax relief for small and medium-sized incomes? Happy, but counter-financed.” Where Söder wants tax cuts for everyone, the SPD demands a gradual burden.

In this way, Walter-Borjans combines the debate about an economic stimulus package with the proposal of his co-boss Saskia Esken, who recently brought in a special levy for the wealthy. The one-off levy is “one of the ways to get government finances in order after the crisis,” said Esken (read how economists believe that the rich can pay for the corona crisis here). The Union bounced off their proposal.

However, Söder’s demands are not as surprising as the outrage by Walter-Borjans suggests. As early as mid-March, after a top meeting with Bavarian business associations, the CSU boss spoke out in favor of lowering the electricity tax and the EEG surcharge as well as the value added tax for hotels and restaurants. “Tax cuts have the advantage that they take effect immediately,” said Söder.

Despite all the differences, the Union and the SPD could come closer to one question: the partial abolition of the solidarity surcharge, which is actually planned for early 2021. Finance minister Scholz has proposed to bring them forward to July 1, and prominent economists are also in favor of this. Söder, like the CDU, is calling for a complete abolition of solos, which the SPD rejects. But if the grand coalition is known for one thing – it is for compromise.

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