Who would benefit from the parties’ relief plans
ResearchZEW Analysis of the Party Programmes for the German Federal Election, Part 1
ZEW Mannheim has calculated the financial impact the party programmes for the federal election would have on private households. According to these calculations, the tax reductions proposed by FDP, CDU/CSU and AfD would greatly benefit high-income groups, while the programmes of SPD, the Green Party, the Left Party and the Sahra Wagenknecht Alliance (BSW) would mean an increase in income for low and medium-income groups in particular.
This is the result of an analysis conducted by a team of researchers at ZEW, who evaluated the effects the parties’ key proposals for a reform of taxation, minimum wage and social benefits would have on private households.
The fiscal effects of the respective election manifestos on social security, federal and state budgets will be published in the coming days.
SPD, Greens, Left Party, BSW and CDU/CSU provide relief for low earners
A single-earner married couple with two children and a low income would be financially better off if the election manifestos of the SPD, Greens, Left Party, BSW or CDU/CSU were implemented.
With a gross income of 40,000 euros per year, this family would have 6,150 euros (Left), 1,010 euros (BSW), 870 euros (Greens), 860 euros (SPD) and 300 euros (CDU/CSU) more than before (on a rounded basis).
If the FDP or the AfD programme was implemented, this family would have less money at its disposal: With the AfD programme, it would be 440 euros less a year; with the FDP programme it would be 1,520 euros less.
The effect of the FDP programme is due to plans for a reform of basic income. With the AfD, the effect results from a complicated interaction between tax reductions and crediting rules applicable to housing benefit. If the programmes were actually implemented, these disadvantages would presumably be avoided. Households with slightly higher incomes of 60,000 euros per year would already be significantly better off with the AfD and FDP programmes.
Top earners benefit from CDU/CSU, FDP and AfD
In the CDU/CSU, FDP and AfD programmes, high-income households benefit more strongly from planned tax reforms. A married couple with two children and a single annual gross income of e.g. 180,000 euros would receive an additional 19,190 euros (AfD), 11,990 euros (FDP) or 5,840 euros (CDU/CSU). With the SPD programme, the same family’s income would increase by 2,200 euros; with the programme of the Greens it would rise by 100 euros and with the BSW programme it would remain the same. The Left Party’s programme is the only one to reduce the income of this family, causing it to decline by around 800 euros.
“SPD, the Greens, the Left Party and BSW want to provide tax relief to the low and medium-income groups by increasing taxes on high-income households. In contrast, with the CDU/CSU, FDP and AfD programmes, the relief would increase with the income,” explains Professor Holger Stichnoth, head of ZEW’s Research Group “Inequality and Public Policy” and co-author of the study.
Which calculations were made?
The ZEW researchers analysed the financial impacts the different parties’ reform proposals would have on private households. The calculations are based on data from the Socio-Economic Panel (SOEP).
They take into account the election manifestos of the parties currently represented in the Bundestag and of the Sahra Wagenknecht Alliance. If a proposal in a manifesto was worded too vaguely for calculation purposes, the researchers made plausible assumptions based on political decisions and statements made by the respective party. The calculations do not account for economic consequences. For instance, they do not calculate whether a higher minimum wage also costs jobs in addition to increasing income, or whether tax relief promotes economic growth.
The calculations were made in cooperation with the daily newspaper “Süddeutsche Zeitung” (SZ), which provided support for the research on the election manifestos. The calculations were carried out by ZEW.