Merkel Chastises Opposition for Blocking Tax Relief

“Incomprehensible” that the left should block tax cuts, says the German chancellor.

German chancellor Angela Merkel addresses the Bundestag in Berlin, October 18
German chancellor Angela Merkel addresses the Bundestag in Berlin, October 18 (Bundesregierung)

German chancellor Angela Merkel criticized her left-wing opposition in an interview on Monday, telling the Braunschweiger Zeitung, “It’s just not fair and it’s actually incomprehensible” that they should block a proposed €6 billion in tax cuts.

Merkel, who will be seeking a third term in September of next year, has largely refrained from campaigning against opposition parties whose supports her government needs in the upper chamber of parliament. The Social Democrats and Bündnis 90/Die Grünen have also backed her hard line in the European sovereign debt crisis and Merkel has been hesitant to jeopardize that support.

Wednesday’s defeat of the coalition’s tax bill was particularly painful for Merkel’s Christian Democrats and their liberal partners, however, as tax relief had been among their key election promises in 2009.

The two left-wing parties argued that there was no room for tax cut as it would have reduced revenues to state and local governments. But their primary concern was that the bill didn’t distribute the tax burden more disproportionately. They said they would have voted for tax relief for middle-class workers if the coalition had simultaneously proposed to raise taxes on higher incomes.

The bill would have leveled out what is known as “bracket creep” in Germany where workers can see their net salary fall if they get a pay raise when the tax thresholds are not adjusted for inflation. When their salary is raised, workers enter a higher tax bracket and end up keeping less of what they earn.

Removing this unfairness from the tax code could have given Merkel’s liberal coalition partners, a pro-business party, a minor boost in the polls. Right now, surveys suggest that they might not return to parliament in the next federal election which would force the Christian Democrats into a coalition with either the Social Democrats or possibly the Greens. Neither prospect is particularly appealing to most conservatives.