Tax payments by the economy: Between courage and cockiness

It is quite brave of the city of Frankfurt and the state to continue to count on the current record tax revenues in the future.

Just one year after the outbreak of the pandemic, Frankfurt was able to collect more trade tax revenue than ever before, and the country managed without additional debt.

And all because companies made higher-than-expected profits last year.

The difference between courage and high spirits can usually only be seen in the result.

It is not certain that the profits will continue to bubble up so strongly in the future.

Sure, the companies have used the crisis for a reorientation, after painful conversion work, Hessian companies are now also benefiting from the boom in electric cars and the increasing demand for renewable energies.

Skilled workers are becoming increasingly scarce

But the bet on continued high corporate profits is not only risky because there are many imponderables.

Hardly anyone can predict how long fossil energies will remain expensive and global supply chains disrupted.

And a persistently high inflation rate could reduce demand and cause wages to grow faster.

Such a bet is also dangerous because long-term risks continue to be inadequately addressed.

For example, there is the shortage of skilled workers.

Some people don't want to hear the word anymore, but companies can't grow without trained employees.

However, they are becoming increasingly scarce, for reasons of demographics, the more difficult immigration and also because of the continuously rising rents, which devalue even relatively high wages from year to year and thus reduce the attractiveness of the location.

And companies need space, but it is being cut further and further because it is needed for new apartments or for huge data centers, which lure with digital prestige and lucrative investment promises, but only bring in a few dozen jobs - and thus only little income tax or trade tax.

If viable solutions for such long-term risks are not found soon, politicians will not have to wait very long for the economy to pay increasing taxes.