Analysis: Merkel under pressure to raise tax for rich Germans

Dave Graham Reuters 08/24/2010 14:58

As an age of austerity looms for some of Germany's poorest citizens, pressure is growing to impose higher taxes on the richest, setting the scene for fresh conflict in Chancellor Angela Merkel's ruling coalition.

Thousands have taken to the streets this summer to demonstrate against plans by Merkel's center-right government to cut billions of euros in spending on the unemployed without imposing a similar burden on the other end of society.

Some senior figures from her conservative Christian Democrats (CDU) have urged Merkel to consider higher taxes for the rich, lest a steady slide in the administration's popularity accelerate into freefall before six state elections next year.

This would set the CDU on a collision course with its junior coalition partner, the pro-business Free Democrats (FDP), whose campaign for tax cuts in 2009's federal election won them a record share of votes, giving Merkel a center-right majority.

With support for the CDU now crumbling to levels rarely seen since Merkel took office in 2005, the pragmatic pastor's daughter may decide that shoring up her own party is the lesser evil when parliament's summer recess ends next month.

Gero Neugebauer, a political scientist at Berlin's Free University, said arguing for higher taxes for the rich could convince centrist voters to turn out for the CDU in the regional elections next year without alienating the party's right wing.

"The CDU needs something to drag itself back up, and there are good arguments in favor of it," he said. "Everything that's been suggested in the party to date would still leave the top tax rates well below what they were under Helmut Kohl."

When Kohl left office in 1998, the standard tax rate for top earners was 53 percent. It is now 42 percent.