German government’s ‘Inflation Compensation Act’: more money for the rich

Record inflation and soaring energy prices are plunging hundreds of thousands of working families in Germany into a desperate struggle for survival. But the German government’s response is to flood the super-rich with more cash gifts.

This is the central message of the so-called “Inflation Compensation Act”, which Federal Finance Minister Christian Lindner (Liberal Democratic Party-FDP) presented this week, which must be approved by the cabinet in september.

Finance Minister Christian Lindner at the Bundestag Finance Committee [Photo by Deutscher Bundestag / Janine Schmitz / photothek] [Photo by Deutscher Bundestag / Janine Schmitz / photothek]

Even economists close to the government admit that Lindner’s proposal accelerates the redistribution of wealth from the bottom up. “A reform in which top earners theoretically earn more is simply coming at the wrong time,” said Veronika Grimm, a member of the German Council of Economic Experts. Rhine post.

Jens Südekum, professor of economics in Düsseldorf and adviser to the German government, said The Spiegel: “This package will bring relief to all income brackets, and there is simply no time for that at the moment. People with high incomes actually benefit the most from the measures in absolute terms. Those who earn very little money are not helped by tax measures Given rising inflation, we would need redistribution from the top down, not the other way around.

There were also isolated critical voices in the ranks of the other members of the “traffic light” government coalition, the Social Democratic Party (SPD) and the Greens. But that doesn’t mean anything. Rather, it shows in an “almost ideal-typical” way “how the traffic light system works”, as the curator Frankfurter Allgemeine Zeitung cynically commented. “Everyone is raising their claim loud and clear…but the goal of reaching an agreement is kept in view.”

When government advisers and politicians publicly criticize Lindner, it is for fear of a “hot autumn”. Professor Südekum openly states this in his interview with The Spiegel. He fears that there will be protests not only against high prices and poverty, but also against the war in Ukraine.

In response to The Spiegel», « Do you expect political radicalization and a hot autumn? he answers: “Of course, the radical parties will cannibalize the situation. But if the price of gas explodes in winter and the state leaves the poorest to fend for themselves, solidarity with Ukraine will also collapse… We must therefore find a social solution so as not to play into the hands of the Kremlin .”

The government will not allow itself to be swayed by such objections. SPD chairman Lars Klingbeil told the ZDF morning show that although he had “different ideas in detail”, Lindner had sent the “right signal” with his plans.

Chancellor Olaf Scholz (SPD), who himself was finance minister under Chancellor Angela Merkel, immediately backed Lindner and expressed his “fundamental goodwill”. Speaking to broadcaster ARD, Scholz said Lindner’s proposal was “very helpful”. Since he himself had compensated for tax bracket drift when he was finance minister, this “could not have been a patently wrong idea”, he said.

Bracket creep means that middle-income groups automatically shift to a higher tax rate when their wages rise, leaving nothing of the increase behind. Lindner uses this as an excuse to meet the needs of his wealthy clientele.

He wants to provide total relief of 10 billion euros to 48 million taxpayers by increasing the tax rates at entry and at the ceiling. This corresponds to an average of €192 per year, but it is very unevenly distributed. High earners with an annual income above €62,000 will save just under €500, while high-income married couples will save up to €2,000. A family with two children and an income of €30,000, on the other hand, will save a maximum of €300. Those who earn less than €10,350, the threshold for paying income tax, leave completely empty-handed.

Lindner’s tax reform is just the tip of the iceberg. The current inflation rate, officially 7.5%, is melting incomes like glaciers in the face of global warming. The unions, in cahoots with the government, are doing all they can to keep wage deals well below the rate of inflation.

Especially with rising gas prices – a direct result of sanctions and the war on Russia – working-class households face devastating burdens while big energy companies rake in billions in profits.

A typical family will have to pay several thousand extra euros for their domestic gas bill. Energy suppliers have already started sending higher bills. Cologne energy supplier Rheinenergie will start raising prices by 116% from October 1. An average bill of €2,800 per year for gas will increase to over €6,000, which corresponds to a monthly increase of €270.

The government promised to remedy the situation. But so far it has only decided on a one-time lump sum grant of €300, which will be paid in September and subject to taxation. It aims to offset high gasoline prices and does not even cover a month of higher energy prices.

At the same time, the government itself has pushed up the price of gas for home heating and cooking even more by passing a gas tax that will be charged to all gas consumers. The levy is used to offset losses incurred by municipal utilities and intermediaries such as Uniper, who cannot immediately pass on increased purchase prices to their customers. Thus, the money flows into the coffers of the big energy companies, which make super profits thanks to the high prices of the world market.

Lindner’s inflation compensation law demonstrates the class character of the “traffic light” coalition, which wholeheartedly represents the interests of the capitalists against the working class.

In order to defend the profits of German companies and banks, to make Germany the leading military power in Europe and to intensify the proxy war against Russia in Ukraine, she is ready to walk over corpses and crush all the social and democratic achievements of the working class.

James R. Rhodes