The moral politics of German taxation

Why Germany increasingly links virtue, productivity and income — and why the argument is becoming more bitter.

Dear Reader,

The word comes originally from the realm of sport. A single, brilliant Leistungsträger can raise an average group of players to the cusp of glory (Michael Ballack at the 2002 World Cup). Three or four of them make you almost unstoppable (Manuel Neuer, Philipp Lahm and Bastian Schweinsteiger at the 2014 World Cup).

A team without a Leistungsträger, on the other hand, can be a collection of supremely talented individuals but is never likely to win anything. A Leistungsträger is rarely the flashiest member of the team. It is a player who leads by example, who possesses a will to win that carries everyone around him.

In modern Germany, however, the term has escaped the football pitch. It is now increasingly used to describe an entire social class.

The Leistungsträger of the German political Right’s imagination is a group of people that, through a combination of brains and hard work, carries the rest of society. These are the doctors, lawyers and business executives sacrificing their own time for the good of their company — or for the good of society. Their ingenuity and ambition drive the economy forward. Their willingness to work deep into the night is what keeps the country running. That hard work is compensated with high salaries. But the taxes on those salaries also prop up those in society who have been less blessed with natural talent and ambition.

In the Anglosphere, politicians generally prefer euphemisms like “middle England” or “hardworking families” when implying the moral superiority of the middle classes. Germany’s idea of the Leistungsträger is much more explicit. In its rawest form, it openly links productivity, income and virtue.

According to the AfD, the Leistungsträger have been placed under a yoke by the state in order to fund welfare payments for work-shy migrants or ideological vanity projects like military support for Ukraine. In this telling, Germany’s productive classes are being punished for their own industriousness.

However, you are now just as likely to hear eulogies to the hard-working Leistungsträger in a liberal broadsheet as you are in a spit-flecked Bundestag speech by an AfD lawmaker. The reason is simple: Germany’s political debate increasingly revolves around the alleged virtues of the Leistungsträger because ever more people are expected to pay the top level of income.

Bracket creep has steadily pulled millions of professionals into tax bands that were once reserved for the genuinely affluent. Germany’s top tax bracket now begins at salaries of around €70,000 a year — a category that includes not only senior executives but also engineers inside Germany’s industrial sector, doctors, lawyers and many upper-middle-class professionals. Four million Germans are now classified as top earners, up from around half a million 30 years ago.

At the same time, an ageing society reliant on migration is putting pressure on the state to raise extra taxes for education, healthcare and pensions. Economic growth has stagnated for years, reducing the amount of new wealth available for redistribution. The result is a growing feeling among many salaried professionals that the state is demanding too much from them.

Friedrich Merz, the German chancellor, does not directly contrast the Leistungsträger with a slothful Lumpenproletariat. At the same time, he has repeatedly complained that Germans have forgotten the value of hard work by working part-time or demanding four-day weeks, while arguing that Leistungsträger are already being taxed too heavily.

Asked recently whether top earners should pay more tax, he responded: “How far do we want to go in punishing our Leistungsträger?” These high achievers already foot half of the income tax bill, he said. “We can’t go any further than that.”

Photo by Fauzan Saari on Unsplash

The concept of the Leistungsträger has returned to the centre of political debate because the government is currently arguing over income tax reform. Finance Minister Lars Klingbeil, of the SPD, recently announced plans for tax relief aimed primarily at low and middle earners — losses to the exchequer that would be compensated for by higher taxes on top earners.

Ordinary workers “keep the show on the road every day” and “need to end up with more money in their pockets,” Klingbeil argued. In other words, the working classes are the real Leistungsträger of German society. If they see their wages stagnate while the rich continue to accumulate wealth, they will lose the motivation to work, he warned.

The reaction from parts of the right-wing press was revealing. Klingbeil was accused of engaging in “class warfare”, “left-wing populism” and “social jealousy” by implying that a nurse was somehow more virtuous than a doctor simply because she earned less. Yet throughout the same commentaries, journalists repeatedly used the word Leistungsträger to refer exclusively to high earners — apparently oblivious to the fact that the term itself already links high salaries to virtue.

The contradiction revealed something deeper about modern Germany. Almost everyone now claims to speak for the Leistungsträger. The feeling among workers that they don’t get due recognition for the work they do is spreading throughout society.

At the same time, there are reasonable arguments for offering tax relief to higher earners. A recent article in Der Spiegel pointed out that many people in Germany’s top tax bracket are classical SPD voters. Raising the level at which the top tax rate kicks in would therefore disproportionately benefit the party’s own electorate.

Another argument is that highly qualified workers are internationally mobile in a way that lower-skilled workers often are not. Doctors in particular frequently move to Switzerland once they have completed their training in Germany, attracted by lower taxes and higher salaries. The emigration of highly skilled workers educated through Germany’s free university system is a phenomenon that costs the country billions in lost future tax revenues every year.

But what would a fairer distribution of the tax burden actually look like?

Several commentators have pointed out that the upper half of earners — everyone making more than roughly €40,000 a year — already pays more than 90 percent of all income tax revenue. At first glance, that sounds extraordinarily skewed. But what exactly does it prove?

Is it evidence that hard work no longer pays? Or is it evidence that lower earners are increasingly incapable of paying their bills while also making a meaningful contribution to the tax base?

Arguably, lower earners have been squeezed so hard by housing, energy and living costs that meaningful taxation of them has become politically and economically impossible. If so, Klingbeil’s proposal to improve the Arbeitsgeist of low earners through tax cuts is unlikely to transform Germany’s public finances: many of them already pay next to nothing.

Yet high earners increasingly reject the idea that, with mortgages and private pensions to pay, they themselves are rich. Many feel that you are only truly wealthy if you possess substantial assets.

That distinction increasingly matters because Germany’s debate about tax fairness may ultimately be directed at another target. Eventually, the divide which Merz’s coalition may agree upon won’t be between low and high incomes, but between those who live from labour — however well paid — and those who live from accumulated wealth.

One increasingly popular proposal is to tax assets more aggressively rather than salaries. Neighbouring Switzerland operates a progressive wealth tax that extracts far more from billionaires than from the owner of a medium-sized company valued at a few million euros. According to Oxfam, wealth taxes account for around seven percent of Swiss tax revenues.

“People on €100,000 are furious — and they’re right to be,” the liberal Süddeutsche Zeitung stated. Bridges are crumbling, public transport is a mess and you can’t get a doctor’s appointment — “top earners pay ever more and get ever less in return.” Let the multimillionaires pay the tax bill, the newspaper said “Our Leistungsträger already pay their fair share. Enough’s enough.”

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