German government in dispute over tax on high-income earners

Germany’s CDU-SPD coalition government is in dispute, after Finance Minister Lars Klingbeil (SPD) suggested the country should raise taxes for high-income earners.

Klingbeil hints at tax increases for wealthy Germans

In an interview with public broadcaster ZDF, Federal Finance Minister Lars Klingbeil has hinted that the German coalition government will increase taxes on high-income earners in order to fill a 30-billion-euro deficit in its 2027 budget.

“The SPD has always been of the opinion that high earners and people who have large assets [...] should contribute a portion of these so that society can be more equal,” Klingbeil explained. 

When the CDU won the federal election in February, the SPD joined a coalition with the centre-right party. In May, the two parties announced their coalition agreement, which did not include any tax increases.

Now, Klingbeil has said he won’t “take any option off the table”. While no changes would be made without both parties agreeing, the CDU has been swift to contradict the finance minister’s allusions to increasing taxes for those with higher incomes.

“This is not the time to be thinking about tax increases,” CDU whip Jens Spahn said in an interview with Focus, “consolidation and cutting social benefits is central”. Chief whip Steffen Bilger (CDU) agreed, telling the Bild tabloid that “Germany is a high-tax country. In an OECD comparison, we have the second-highest tax and social security contribution rates.”

How much tax do wealthy Germans currently pay?

Germany has four tax brackets. Those who earn less than 12.096 euros per year are exempt from paying income tax. Those who earn between 12.096 and 68.480 euros annually are taxed between 14 and 42 percent depending on their income. 

Those earning between 68.481 and 277.825 euros annually are taxed at 42 percent. Then there is the “wealth tax”; those who earn more than 277.826 euros annually are taxed at 45 percent. Only 4 million of the 83,9 million people in Germany are taxed at the 45 percent rate.

While Bilger is generally right that Germany is a high-tax country for most earners by OECD comparison, the super-rich are taxed less in Germany than in most other European countries. In 2025, Denmark taxes its top earners at the highest rate in Europe, at 55,9 percent. 

France (55,4 percent), Austria (55,0 percent), Spain (54,0 percent) and Belgium (53,5 percent) round out the top five. Germany’s super-rich only pay the 10th-highest personal tax rate in Europe.

Increasing wealth and poverty in Germany

Germany's levels of wealth inequality are also closer to those of the United States than to neighbouring France.

According to figures from the Bundesbank, at the end of 2024, private households in Germany were richer than ever before. The bank assessed that half of Germany’s private household assets (4,525 billion euros) belong to just 4 million (10 percent) of the country’s 41,3 million households. 

Meanwhile, poverty is becoming more widespread in Germany. According to figures from the Federal Ministry of Family Affairs, Senior Citizens, Women and Youth, 23,9 per cent of all children and young people under the age of 18 in Germany are at risk of poverty or social exclusion.

Old people are also increasingly at risk; 3,245 million people over the age of 65 and living in Germany were at risk of falling into poverty in 2023, up from the 3,157 million at risk in 2022.