Appeal

The Introduction of a Capital Levy Now!

The current financial crisis will increase unemployment, poverty and inequality. This crisis is predominantly the result of neoliberal policies, which favoured unregulated markets and did not set any social or environmental limits to global capitalism. The crisis offers an opportunity for new socio-economic policies. The way out of this crisis must be found through massive future investments into the environment, education and social justice. We, who have come into wealth by either inheritance, jobs, successful businesses or capital investments, demand that all wealthy members of society are made to participate in the costs of mitigating the crisis, and that this revenue be invested in new initiatives to meet the urgent challenges of the future. Individuals with a net wealth of more than 500,000 Euros must do their bit and pay a capital levy of 5% per annum for a period of two years; after that the capital levy should be converted into a wealth tax of at least 1%. The billions so far generated by various recovery programmes are being used to subsidise purchases of brand new fuel-guzzlers and road building projects, whereas not enough funds are being directed towards investments in sustainable developments. As an alternative, the revenue from the new capital levy should be invested in the ecological restructuring of the economy, education workers, health and social care, as well as in generating transfer income. In order to prevent tax evasion of the new levy, new laws that take into account all capital streams being directed into tax havens, as well as any capital deposited in these domiciles, must be introduced. Furthermore, German tax authorities must have the power to impose sanctions against individuals and companies that have business dealings with tax havens. We also demand regulatory measures to prevent a future crisis to arise from financial speculation, and the fair distribution of wealth on an international level.

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Hermann Dass (Doctor) Niedenstein, M. Edding (Teacher) Hamburg, Bruno Haas (Philosopher) Berlin, Susann Haltermann (Director Gekko Foundation) Hamburg, Frank Hansen (Man of Private Means) Schwäbisch Hall, Dietrich Hauswald (Teacher) Hamburg, Barbara Krebs (Psychotherapist) Frankfurt am Main, Dieter Lehmkuhl (Doctor) Berlin, Irmingard Weise (Doctor) Berlin, Ernst Ulrich von Weizsäcker (Wissenschaftler), Hans-Joachim Schellnhuber (Klimafolgenforscher), Potsdam, Georg Schramm (Kabarettist), Dieter Dehm (MdB, Die Linke) and 50 other signatories.

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Who we are and what we want?

We are a group of 62 wealthy individuals from all parts of German society, each with a personal net worth of over €500,000.

In May 2009, our group of then 21 people launched a campaign for fairer taxation. We addressed the general public and the government and called for a temporary capital levy of 5% per year on capital exceeding €500,000 for the following two years. This would generate a revenue of more than €150 billion for the federal budget funds. This money should then be invested exclusively in ecological projects, education, healthcare and welfare – a ‘New Green Deal’ which would allow us to meet the immediate challenges we face, such as climate change, education, and poverty in a rich country like ours.

In addition, we have called for the former capital levy that the Kohl Government abolished in 1997 to be re-instated at a rate of at least 1 %. This would generate approximately an additional €15 billion per year for the Länder (German Federal States) budget. Furthermore, we have asked for tax havens to be closed down, for the financial markets to be strictly regulated and for a fairer distribution of the economic wealth that is generated by society on a national and international level1.

As wealthy citizens of this country we want the ‘Ownership entails obligations’ principle laid out in our constitution, widely ignored by German politicians during the past 10 to 15 years,2 to be upheld in order to serve the public good.3

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Why we are doing this (what moved us)?

For moral, political and economic reasons, the wealthy should bear a greater share of the burden caused by the financial crisis.

We were strongly motivated to start this campaign by the financial and economic crisis, and by our fears that the general public, i.e. mainly ordinary taxpayers and the poor, who had no responsibility in the crisis, nor had they profited from the boom that preceded it, would have to pay for a way out of it. What we feared has now become a reality, with the German and most other Western governments embarking on austerity programmes involving deep cuts in wages, health, education and social security. These cuts are primarily hitting the middle classes and the poor, while the wealthy, the banks and bankers have been largely spared.

As part of the wealthiest 3% of people in this country, it is our deep conviction that the rich should contribute more to cope with the financial burden of the crisis. This is not just a matter of fairness (or the moral argument) , but a sound argument in economical and political terms; this would stimulate the economy and reduce the budget deficit and public debt, reducing in turn the rising inequality that undermines democracy and destroys the social fabric of society.

When our manifesto was launched, the new German government was heading for further deficit spending and tax reductions, instead of looking for solutions to reduce the huge budget deficit and public debt. These measures would only help the better-off and would seriously hinder the efforts of future generations to embark on the necessary investment projects mentioned above. Raising revenue for the depleted budgets by taxing those who can afford it, and who have immensely profited from the boom and speculation that preceded the crash, is the right answer. In contrast to the austerity programmes, these taxes would hardly touch those who are affected by it.

There are two further important reasons to increase taxation on the wealthy:

  1. Huge amounts of liquid assets from the wealthy and businesses went into speculation on the financial markets and into a virtual economy, rather than being re-invested into the real economy. This money therefore contributed - as we now know – to the deep financial crisis. Re-directing this capital and investing it in the programmes mentioned above, along public debt reduction and financial market regulation, will help safeguard our future against further cycles of boom and bust.
  2. The bank bailouts have massively increased public debt, effectively saving the money of the affluent.

Increasing inequality, the erosion of the middle class, and poverty in a rich country: their negative impact on mankind and society as a whole (the facts, figures available 2009/10).

The gap between rich and poor in Germany has widened deeply in the last 15 years for a number of reasons:

One reason for it is the tax reduction policies of all past German governments, which mainly favoured businesses and the rich. According to the OECD (2011), in no other industrialized country has inequality, together with the number of millionaires, increased as much as in Germany since the year 2000. During the same period the wages and disposable income of most Germans stagnated, or even decreased by as much as 15% among pensioners and the poorer 10% of the population. The wealth of the rich and the poverty of the poor are therefore deeply interrelated.

Gains in income during the last 15 years have been distributed in a grossly unfair manner and have almost entirely gone to the top-earning 10 % and, among this group, mainly to the top 0.1 to 1 %. The top 10 % of households now own about 66% of all assets and the top 1 % about 34 % (DIW: SOEP). Even though the officvial top income tax rate is 42 (45)%, the 450 richest households and the top 10 % only pay 25 % respectively 33 % tax on their pre-tax income.

The income of the wealthy is often taxed less than the income of hard working ordinary people, since the wealthy’s main source of income is from capital gains, i.e. effortless income, taxed only at the rate of 25%. Another reason for the widening gap in income and wealth is the following: during the last decades, top earners’ incomes have increased a great deal more than those of ordinary earners, while their relative tax rates have decreased considerably, emptying the public coffers as a result. The public deficit is now about €2,1 trillion(2012), while the net assets of the top 10 % households is two to threefold as high (4.8 trillion, DIW). The rich are therefore further profiting from public debt via interest payments from sovereign debt holdings.

Almost 30 % of the working population (figures from 2009/10) are either unemployed, live on social welfare or work in low-paying jobs, whereas 14 % of people live in poverty that particularly affects children. There are well-founded fears that the middle classes will climb down the social ladder.

Despite having once been a fairly equitable society, during the last 10 years inequality in Germany has increased more than in any other industrialized country: its ranking jumped from a rather low to an upper-middle position among OECD countries (measured by the Gini coefficient for income). Inequality has been increasing almost worldwide (there are few exceptions), along with neoliberal policies that now appear to have failed. The nature of inequality in Germany today is quite different from post-war times until the 1980s. The vast majority of people are no longer profiting from gains in economic growth. If this trend continues, Germany will soon become one of the most unequal industrialized western countries, with all the negative consequences that come with having an exceedingly unequal society as plenty of evidence shows: it seriously impacts the quality of life of individuals, their well-being and health, as well all social cohesion, crime and security (gated communities, riots of the underprivileged, burning cities), threatening social and economic stability - thus undermining the very fundamentals of democracy itself. Nobody can reasonably want this.

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What needs to be done?

We have to turn to sustainable and fair socio-economic policies for the sake of all of us and for the sake of our planet, instead of serving the interest of a privileged few.

It is now time for a substantial change. Governments should do what they are obliged to and were voted for by the people: serve the common good.

We believe our proposal (which according to a poll in 2009 is strongly backed by the German people) is a crucial step towards meeting this goal. Studies in the USA and elsewhere show that although people are not aware of the existing deep gap in incomes, they think that the current distribution of wealth is unjust and most people wish for a fairer distribution of economic wealth. (Not surprisingly, German parliamentarians, as a poll shows, think the opposite).

At least in continental Europe the debate is now changing. Three and a half years ago, when we started, our call was a lone voice in the wilderness. Now, former chief editors of leading conservative newspapers like Charles Moore 4 (The Telegraph in the UK) and Frank Schirrmacher 5(FAZ, Germany) feel deeply irritated and have stated that traditional conservatism has been taken over by neoliberal ruthlessness. In addition, the former German Supreme Court judge, tax expert, and once member of Angela Merkel’s campaign team, Paul Kirchhoff, recently denounced the deeply unjust feudal German tax system that favours the rich and powerful. More and more economists, think-tanks and institutions including the OECD are asking for higher taxes on the rich as a way out of the financial crisis (with regards to Germany). Even two senior directors of the renowned US Boston Consulting Group have suggested an European-wide tax of 30 % on all financial assets as the best and least harmful way to restructure debt in the Eurozone, and to get the economy restarted (Back to Mesopotamia 2011). Distinguished academic scholars such as the Nobel laureates Joseph Stiglitz and Paul Krugman, as well as the renowned epidemiologists Richard Wilkinson and Kate Pickett (2011), address the negative consequences for society at large and for the economy of growing inequality.6

More and more wealthy people like us in USA, France and Italy have recently been asking to pay more taxes as a way of sharing the burden of the crisis, recognizing their obligations towards the common good. 7It is now up to governments to respond to this call and to turn to people-focused politics and ‘stop coddling the Super-Rich’, as Warren Buffet stated in2011. Some governments (Spain, France and Italy) have now announced and partly introduced-reluctantly and under public pressure-, higher taxes for the rich. German opposition parties plan to do likewise should they get into power in 2013. The tide is changing. Growing inequality was a widely neglected topic in the German public debate until recently. It cannot be ignored any longer. The facts are more than clear. This year’s (2012) Government Report on Wealth and Poverty and a broad civil society coalition for fair redistribution of wealth, which we are part of (‘Reichtum Umfairteilen’), have put the topic on the public agenda. Conservative Governments are in danger of losing their legitimacy, as well as the elections, if they do not respond to the increasing call for the rich to pay more tax, in order to reduce public debt, and to fund the necessary public services and a new green deal for the economy on which the well being of the vast majority of the population and future generations rely. Only balanced societies, as evidence shows, can be prosperous.

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1Assets in tax havens are estimated by experts to be worth between $21-$32 trillion worldwide, if these figures were included it would make the already huge inequality even larger than official figures show; TJN: Inequality: You don’t know half of it, 19.07.2012.

2Back in the beginning of 2009 when our manifesto was launched, renowned economists like Joseph Stiglitz and others were already strong supporters of imposing higher taxes on the wealthy, rather than increasing general tax or resorting to spending cuts in social programmes and infrastructure.

3Germany is almost at tax haven, as far as capital tax is concerned, in comparison with other OECD countries. Capital related taxes (e.g. on real estate, inheritance, stock and bonds) generate here only 0.9% of GDP (OECD countries 2.1%, UK 4.5%, France 3.4%).

4Charles Moore: I am starting to believe that the left might actually be right, The Telegraph, July 22, 2011: ‘The rich run a global system that allows them to accumulate capital and pay the lowest possible price for work. The freedom that results applies only to them. The many simply have to work harder, in conditions that grow ever more insecure, to enrich the few. Democratic politics, which purports to enrich the many, is actually in the pocket of those bankers, media barons and other moguls who run and own everything. ...Everything is different now. One thing that is different is that people in general have lost faith in the free-market, Western, democratic order... (and) they ask the simple question, “What's in it for me?”, and they do not hear a good answer.’

5Frank Schirrmacher: Ich beginne zu glauben, dass die Linke recht hat (I'm starting to believe, that the left is right), FAZ 15.8.2011.German Deutsches Institut für Wirtschaftsforschung (DIW) in “Die Welt“:Zwangsanleihen-Warum die Reichen mehr Geld hergeben sollten, 11.07.2012.

6Joseph Stiglitz (2012): The Prize of Inequality: How today’s Divided Society endangers our Future. Wilkinson, Richard, Kate Pickett (2011): The Spirit Level: Why greater Equality makes Societies stronger.

7“Das (e.g. Steuererhöhungen) ist in den Schichten der wirtschaftlichen Eliten und meinungsbildenden Kreisen natürlich keine Nachricht, die auf Begeisterung stößt. Aber es sollte aufhorchen lassen, dass es zunehmend Millionäre gibt, die für sich selbst höhere Steuern für gerechtfertigt halten. Dabei ist zu bedenken, dass in Deutschland die Einkommenszuwächse der letzten 15 Jahre weitgehend bei den reichsten 10 Prozent der Bevölkerung anfielen und die Verteilung entsprechend ungleicher geworden ist. “ Gert G. Wagner, chairman of the executive board of the renown German Deutsches Institut für Wirtschaftsforschung (DIW) in “Die Welt: Zwangsanleihen-Warum die Reichen mehr Geld hergeben sollten“, 11.07.2012.

International press archive

Sep 29, 2012When the rich ask to pay more ilsussidiario.net
Sep 24, 2012Mitt Romney and the myth of self-created millionairesThe Guardian
Sep 24, 2012Taxation and Class War: Hunting the richThe Economist
May 22, 2012The New Few by Ferdinand Mount: reviewThe Telegraph
Aug 30, 2011Tax us more, say wealthy EuropeansThe Guardian
Aug 30, 2011Tax Me More, Europe’s Wealthy SayNew York Times

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