The annual report of the German Council of Experts (SVR) caused many astonished faces this year.

The advisory body, which has hitherto been more economically liberal, calls for top earners to be asked to pay more in order to shoulder the burden of the energy crisis.

The so-called economic wise men recommend that the government either increase the top tax rate or introduce an energy bonus for higher earners - and postpone the reduction of "cold progression".

Svea Junge

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The proposals have met with mixed responses among German economists, as the economists panel of the Munich Ifo Institute and the FAZ show.

This time, 153 economics professors at German universities took part in the regular survey, although not all participants answered every question.

While a slim majority opposes energy solos and postponing the Inflation Compensation Act, the push to temporarily raise the top tax rate is dividing economists: 46 percent agree, 52 percent oppose, and 2 percent don't know.

High earners would have benefited

Above all, the critics point to the already high tax burden and the growth-inhibiting effect of tax increases.

In addition, many fear that a temporary increase could become a permanent one.

Proponents, on the other hand, argue that strong shoulders should shoulder more of the burden during the crisis and that higher earners have also benefited from the relief measures, although they have been less affected by the crisis

.

The burdens of the crisis "cannot be equalized for everyone at the same time, but can only be distributed differently through taxes and transfers," writes Andreas Knabe from the University of Magdeburg in the free comment field.

Therefore, support measures for needy population groups must be balanced by a heavier burden on less needy groups, he argues.

“By contrast, debt financing for the aid measures would make fiscal policy more expansive and thus further increase inflation.” He therefore considers the temporary tax increases proposed by the German Council of Economic Experts to be “appropriate”.

Marco Sahm from the University of Bamberg contradicts this: "Tax policy should be geared less to day-to-day political developments and more to long-term financing requirements for state tasks," he writes.

Short-term shocks should therefore be offset by government savings or debt.

Taxes up, expenses down

That's how the majority of economists see it.

When asked about measures to deal with the increased burden on public budgets as a result of the pandemic and the Ukraine war, 52 percent of the economists surveyed – multiple answers were possible – voted for a reduction in public spending.

On the other hand, 43 percent are in favor of tax increases in order to relieve the burden on households.

37 percent voted to suspend the debt brake;

6 percent would support the use of further extra budgets by politicians.

9 percent are in favor of continuing the current policy.

"The results of the survey show that the majority of economists consider it important not only to focus on tax increases when consolidating the budget, but also on spending cuts," says Ifo President Clemens Fuest.